If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Steven Madden, Ltd. (NASDAQ:SHOO) share price is 36% higher than it was a year ago, much better than the market return of around 22% (not including dividends) in the same period. So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 11% in three years.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Steven Madden was able to grow EPS by 3.8% in the last twelve months. The share price gain of 36% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

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

We know that Steven Madden has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Steven Madden stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Steven Madden the TSR over the last 1 year was 39%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Steven Madden shareholders have received a total shareholder return of 39% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Steven Madden better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Steven Madden you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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