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. For example, the Encavis AG (ETR:ECV) share price is up 79% in the last three years, clearly besting the market decline of around 5.7% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 27% in the last year , including dividends .

Since the long term performance has been good but there's been a recent pullback of 3.1%, let's check if the fundamentals match the share price.

View our latest analysis for Encavis

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.

Encavis was able to grow its EPS at 164% per year over three years, sending the share price higher. The average annual share price increase of 21% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

It is of course excellent to see how Encavis has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. In the case of Encavis, it has a TSR of 89% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Encavis shareholders have gained 27% (in total) over the last year. That's including the dividend. That gain actually surpasses the 24% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand Encavis better, we need to consider many other factors. For instance, we've identified 3 warning signs for Encavis (1 doesn't sit too well with us) that you should be aware of.