By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Arrow Electronics, Inc. (NYSE:ARW) share price is up 67% in the last three years, clearly besting the market return of around 30% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 5.1%.

Since the stock has added US$392m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Arrow Electronics

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).

During three years of share price growth, Arrow Electronics achieved compound earnings per share growth of 32% per year. The average annual share price increase of 19% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.24.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Arrow Electronics has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We're pleased to report that Arrow Electronics shareholders have received a total shareholder return of 5.1% over one year. Having said that, the five-year TSR of 8% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. To that end, you should learn about the 3 warning signs we've spotted with Arrow Electronics (including 2 which are significant) .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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