For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Calix, Inc. (NYSE:CALX) share price is up a whopping 405% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 11% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 5.3% in 90 days).

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, Calix moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Calix's key metrics by checking this interactive graph of Calix's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 26% in the last year, Calix shareholders lost 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 38%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Calix you should know about.

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 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.

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