If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Airtel Africa Plc (LON:AAF) share price is 23% higher than it was a year ago, much better than the market return of around 1.0% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Airtel Africa hasn't been listed for long, so it's still not clear if it is a long term winner.

View our latest analysis for Airtel Africa

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year, Airtel Africa actually saw its earnings per share drop 24%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

However the year on year revenue growth of 13% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Airtel Africa 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.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Airtel Africa the TSR over the last year was 30%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Airtel Africa shareholders have gained 30% over the last year, including dividends. Unfortunately the share price is down 1.8% over the last quarter. Shorter term share price moves often don't signify much about the business itself. It's always interesting to track share price performance over the longer term. But to understand Airtel Africa better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Airtel Africa you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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