Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the MTU Aero Engines AG (ETR:MTX) share price is up 65% in the last 1 year, clearly besting the market return of around 5.7% (not including dividends). So that should have shareholders smiling. And shareholders have also done well over the long term, with an increase of 42% in the last three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

See our latest analysis for MTU Aero Engines

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 MTU Aero Engines saw its earnings per share (EPS) drop below zero. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.

We doubt the modest 0.7% dividend yield is doing much to support the share price. Unfortunately MTU Aero Engines' fell 5.0% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

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

MTU Aero Engines is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for MTU Aero Engines in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that MTU Aero Engines shareholders have received a total shareholder return of 66% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. You could get a better understanding of MTU Aero Engines' growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.