Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the SigmaRoc share price has climbed 73% in five years, easily topping the market return of 5.8% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 25%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for SigmaRoc

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. 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.

SigmaRoc's earnings per share are down 14% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. 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.

On the other hand, SigmaRoc's revenue is growing nicely, at a compound rate of 49% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that SigmaRoc shareholders have received a total shareholder return of 25% over the last year. That gain is better than the annual TSR over five years, which is 12%. 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. It's always interesting to track share price performance over the longer term. But to understand SigmaRoc better, we need to consider many other factors. For example, we've discovered 2 warning signs for SigmaRoc (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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