The past year for European Wax Center (NASDAQ:EWCZ) investors has not been profitable

It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by European Wax Center, Inc. (NASDAQ:EWCZ) shareholders over the last year, as the share price declined 41%. That falls noticeably short of the market decline of around 22%. We wouldn't rush to judgement on European Wax Center because we don't have a long term history to look at. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for European Wax Center

While European Wax Center made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last twelve months, European Wax Center increased its revenue by 34%. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 41%. You might even wonder if the share price was previously over-hyped. However, that's in the past now, and it's the future that matters most.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that European Wax Center has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling European Wax Center stock, you should check out this free report showing analyst profit forecasts.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between European Wax Center's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. European Wax Center hasn't been paying dividends, but its TSR of -34% exceeds its share price return of -41%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

European Wax Center shareholders are down 34% for the year, even worse than the market loss of 22%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 17% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with European Wax Center .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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