Investors in IPOs have often sought the sort of market-trouncing returns that characterized a brief and heady period during the late 1990s. But today's IPOs just don't seem to compare. In particular, two recent restaurant offerings gave IPO investors a bit of portfolio indigestion.

Initially, the Ruth's Chris (NASDAQ:RUTH) IPO was expected to price between $15 and $17 a share. But demand was so strong that the stock was offered for $18 a share. IPO fever set in as Ruth's Chris stock opened at $19.80, soared to $23.06, and closed at $20.70 -- a tidy 15.1% gain from its initial offering price. But yesterday, after only six weeks of trading, the stock had dipped to $16.59 -- 7.8% below the IPO price.

In other recent restaurant news, KonaGrill (NASDAQ:KONA) went public five weeks ago at $11. Eager buyers led the stock to open at $13 a share. But two days ago, the stock was trading back down at $11.

That's not to say all hot IPOs immediately turn south. Last October, TexasRoadhouse's (NASDAQ:TXRH) first day of trading saw the stock soar 28.3% over its IPO price of $17.50 a share. The stock's lowest price since then has been $20.38 -- although there are Foolish gourmands questioning the company's valuation.

Fourteen months ago, McCormick & Schmick's (NASDAQ:MSSR) IPO met a bit of a grim reception. It not only went for $12 a share (below the expected $14 to $16) but also trimmed 4 million shares from its offering. Nonetheless, the stock reached a pleasing 52-week high of $20.64 on Tuesday.

The bottom line here? The purchase price matters. Before paying higher prices just after an IPO, realize that many stocks' prices subsequently drop. In addition, surveys have shown that IPOs generally underperform the market on a longer-term basis. According to a paper from Tim Loughran and Jay Ritter, IPOs from the 1970-1990 period have yielded returns of only 5% annually for the five-year period following their initial offerings.

Investors should acknowledge a fundamental truth -- when an investment bank prices an IPO, they usually have enough information to determine the company's fair value. IPO-happy investors may not always take this into account when they drive share prices upward. The next time you see the price of a hot IPO soaring, make sure it's got the valuation to match.

Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.