After the closing bell on Wednesday, Wet Seal (NASDAQ: WTSL) will report earnings for its third fiscal quarter. Going into earnings, it's only reasonable for investors to ask whether the company looks attractive enough to invest in or whether they would be better off sitting on the sidelines to see what happens. Obviously, this represents a trade-off. It would be wise to consider how the company has performed recently, especially in comparison with some of its peers, so that your decision can be a bit more Foolish, not foolish.

What Mr. Market expects
For the quarter, Mr. Market expects very little from Wet Seal. If analysts are correct, then revenue will likely decline by 0.8% from $135.54 million to $134.49 million. Though this may look rather traumatic, revenue trends have been downright abysmal for some of its competitors. J.C. Penney Company (JCPN.Q), for instance, saw its revenue fall by 5.1% to $2.78 billion last quarter from the $2.93 billion the company reported during the same quarter a year ago.

On an earnings per share basis, analysts also expect Wet Seal to come up short. For the quarter, the company is expected to report a loss of $0.12 per share, $0.01 worse than the same quarter a year ago. If accurate, this deterioration in earnings will likely be the result of decreased revenue and fairly stable costs relative to sales. This too is better than J.C. Penney's results, which included a loss of $1.94 per share. This was worse than the loss of $1.72 per share that analysts expected and significantly worse than the loss of $0.56 per share the company reported for the same period a year ago.

The estimated loss per share that Mr. Market is forecasting for Wet Seal is at the lower end of what the company's CEO, John Goodman, predicted. This past October, Goodman stated that while comparable store sales are expected to increase in the low single-digit range, the loss per share will probably come in between $0.10 and $0.12. This suggests that analysts are being very pessimistic about the company's results, which could leave some upside should the company report better-than-expected earnings.

Is the past indicative of the future?
When evaluating a company's value proposition, it can be useful to see how it has performed over the past few years. Though this is far from a perfect indicator, it will allow you to see how well management has performed and what consumers think about a company's products and services.

Using this methodology, we can see that the road for Wet Seal has been pretty bumpy. Unfortunately, there is no general trend for either revenue or net income, which suggests that either management is inept, consumers are unimpressed with the company's products and services, or both.

In juxtaposition, the path for larger rival Macy's (M 1.19%) has been more clear. Net income for the company has improved every year since at least 2009, while revenue has performed likewise (with the exception of its 2009-2010 period). This demonstrates that, unlike Wet Seal, management is proactive and/or consumers like the company's value proposition.

Now, there is a trade-off here. Wet Seal has a market capitalization of $272 million versus $19.8 billion for Macy's. This implies that Macy's has many more resources that can be leveraged, but it also means that the potential upside for Wet Seal is greater if it can appeal to consumers.

Foolish takeaway
When Wet Seal reports, shareholders will either be pleasantly surprised or left feeling downtrodden. It's impossible to say right now what the results for Wet Seal will be, but the situation is expected to be mildly depressed compared to where things stood last year.

With this in mind, investors should remain cautious, but they should also understand that the market is weighing heavily on the side of pessimism. As such, a lot of the downside might already be priced into Wet Seal's share price and even a slight earnings beat could reward those either brave enough to hold shares or smart enough to see something that analysts might be missing.