By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at AIC Mines Limited (ASX:A1M), which is up 72%, over three years, soundly beating the market return of 49% (not including dividends).

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for AIC Mines

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, AIC Mines moved from a loss to profitability. So we would expect a higher share price over the period.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how AIC Mines has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling AIC Mines stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between AIC Mines' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. AIC Mines hasn't been paying dividends, but its TSR of 75% exceeds its share price return of 72%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

AIC Mines shareholders are down 42% for the year, falling short of the market return. Meanwhile, the broader market slid about 1.3%, likely weighing on the stock. Fortunately the longer term story is brighter, with total returns averaging about 21% per year over three years. The recent sell-off could be an opportunity if the business remains sound, 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. Even so, be aware that AIC Mines is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...