If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. To wit, the Cannara Biotech Inc. (CVE:LOVE) share price is 42% higher than it was a year ago, much better than the market return of around 18% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 3.8% in three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Cannara Biotech

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the last year, Cannara Biotech actually saw its earnings per share drop 27%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We think that the revenue growth of 31% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Cannara Biotech's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Cannara Biotech shareholders have received a total shareholder return of 42% over one year. There's no doubt those recent returns are much better than the TSR loss of 0.8% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Cannara Biotech better, we need to consider many other factors. Even so, be aware that Cannara Biotech is showing 5 warning signs in our investment analysis , and 1 of those can't be ignored...

But note: Cannara Biotech may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).