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Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term TruFin plc (LON:TRU) shareholders have enjoyed a 72% share price rise over the last half decade, well in excess of the market return of around 2.2% (not including dividends).
The past week has proven to be lucrative for TruFin investors, so let's see if fundamentals drove the company's five-year performance.
View our latest analysis for TruFin
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years of share price growth, TruFin moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how TruFin has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling TruFin stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's nice to see that TruFin shareholders have received a total shareholder return of 61% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for TruFin that you should be aware of before investing here.
But note: TruFin 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).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.