By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, the World Precision Machinery Limited (SGX:B49) share price is up 88% in the last three years, clearly besting the market decline of around 13% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 19% , including dividends .

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for World Precision Machinery

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, World Precision Machinery achieved compound earnings per share growth of 126% per year. The average annual share price increase of 23% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

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

This free interactive report on World Precision Machinery's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, World Precision Machinery's TSR for the last 3 years was 120%, 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 World Precision Machinery shareholders have received a total shareholder return of 19% over one year. That's including the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that World Precision Machinery is showing 3 warning signs in our investment analysis , 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 SG 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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