By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Auto Trader Group plc (LON:AUTO), which is up 45%, over three years, soundly beating the market decline of 2.5% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 10%.

Check out our latest analysis for Auto Trader Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years of share price growth, Auto Trader Group actually saw its earnings per share (EPS) drop 0.4% per year.

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Auto Trader Group at the moment. Therefore, it makes sense to look into other metrics.

We severely doubt anyone is particularly impressed with the modest 1.4% three-year revenue growth rate. So truth be told we can't see an easy explanation for the share price action, but perhaps you can...

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Auto Trader Group will earn in the future (free profit forecasts).

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Auto Trader Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Auto Trader Group shareholders, and that cash payout contributed to why its TSR of 49%, over the last 3 years, is better than the share price return.

A Different Perspective

Auto Trader Group shareholders gained a total return of 10% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 9% per year over five year. This suggests the company might be improving over time. Before forming an opinion on Auto Trader Group you might want to consider these 3 valuation metrics.

Of course Auto Trader Group 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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