One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, the aim of the game is to pick stocks that do better than an index fund. Kaiser Aluminum Corporation (NASDAQ:KALU) has done well over the last year, with the stock price up 33% beating the market return of 30% (not including dividends). In contrast, the longer term returns are negative, since the share price is 20% lower than it was three years ago.

Although Kaiser Aluminum has shed US$63m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year Kaiser Aluminum grew its earnings per share (EPS) by 255%. This EPS growth is significantly higher than the 33% increase in the share price. Therefore, it seems the market isn't as excited about Kaiser Aluminum as it was before. This could be an opportunity.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Kaiser Aluminum's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Kaiser Aluminum's TSR for the last 1 year was 38%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Kaiser Aluminum shareholders have received a total shareholder return of 38% over one year. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.9% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Kaiser Aluminum better, we need to consider many other factors. Even so, be aware that Kaiser Aluminum is showing 3 warning signs in our investment analysis , and 2 of those are potentially serious...

Kaiser Aluminum is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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

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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.