By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Jardine Cycle & Carriage Limited (SGX:C07), which is up 36%, over three years, soundly beating the market return of 4.7% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 4.4%, including dividends.

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.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During three years of share price growth, Jardine Cycle & Carriage achieved compound earnings per share growth of 31% per year. This EPS growth is higher than the 11% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 8.00 also reflects the negative sentiment around the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. We note that for Jardine Cycle & Carriage the TSR over the last 3 years was 57%, 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

Jardine Cycle & Carriage shareholders are up 4.4% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Jardine Cycle & Carriage you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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