Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. That way, "you'll be buying into a wonderful industry, which in effect is all of American industry," he says.
But there are, of course, companies whose long-term fortunes differ substantially from the index. In this series, we look at how individual stocks have performed against the broad S&P 500.
Step on up, Brown Shoe
Brown Shoe shares have dramatically underperformed the S&P 500 over the last quarter-century:
Source: S&P Capital IQ.
Since 1987, shares have returned an average of 2.5% a year, compared with 9.7% a year for the S&P (both include dividends). That difference adds up fast. One thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In Brown Shoe, it'd be worth just $2,200.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up all of Brown Shoe's total returns (returns would be negative over the period without dividends). For the S&P, dividends account for 39% of total returns.
Now have a look at how Brown Shoe earnings compare with S&P 500 earnings:
Source: S&P Capital IQ.
Again, underperformance. Since 1995, earnings per share have increased by an average of 2.5% per year, compared with 6% annual growth for the broader index.
What's that meant for valuations? Brown Shoe has traded for an average of 31 times earnings since 1987 -- above the 24 times earnings average of the S&P 500. It's far different today, however. Brown Shoe currently trades at a more reasonable 13 times next year's earnings.
Through it all, shares have been disappointments over the last quarter-century.
Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Brown Shoe with a two-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below, or add Brown Shoe to My Watchlist.
Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.