By buying an index fund,streets of new capenna lands you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at

NWF Group plc

(

LON:NWF

), which is up 30%, over three years, soundly beating the market decline of 13% (not including dividends).

Check out our latest analysis for NWF Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

NWF Group was able to grow its EPS at 17% per year over three years, sending the share price higher. This EPS growth is higher than the 9% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 10.87 also reflects the negative sentiment around the stock.

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

earnings-per-share-growth

We know that NWF Group has improved its bottom line lately, but is it going to grow revenue? This

free

report showing analyst revenue forecasts

should help you figure out if the EPS growth can be sustained.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, NWF Group's TSR for the last 3 years was 46%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the

total

shareholder return.

A Different Perspective

It's good to see that NWF Group has rewarded shareholders with a total shareholder return of 32% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with 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. For example, we've discovered

1 warning sign for NWF Group

that you should be aware of before investing here.

Story continues

Of course,

you might find a fantastic investment by looking elsewhere.

So take a peek at this

free

list of companies we expect will grow earnings.

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

This article by Simply Wall St is general in nature. 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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