Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Alfa Financial Software Holdings PLC (LON:ALFA) share price is up 62% in the last year, clearly besting the market return of around 16% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 32% lower than it was three years ago.

Check out our latest analysis for Alfa Financial Software Holdings

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 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).

Alfa Financial Software Holdings was able to grow EPS by 97% in the last twelve months. This EPS growth is significantly higher than the 62% increase in the share price. So it seems like the market has cooled on Alfa Financial Software Holdings, despite the growth. Interesting.

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

We know that Alfa Financial Software Holdings has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Alfa Financial Software Holdings' TSR for the last year was 84%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Pleasingly, Alfa Financial Software Holdings' total shareholder return last year was 84%. And yes, that does include the dividend. That certainly beats the loss of about 7% per year over three years. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. It's always interesting to track share price performance over the longer term. But to understand Alfa Financial Software Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Alfa Financial Software Holdings , and understanding them should be part of your investment process.

Of course Alfa Financial Software Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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