Passive investing in index funds can generate returns that roughly match the overall market. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the Alexander Forbes Group Holdings Limited (JSE:AFH) share price is 88% higher than it was five years ago, which is more than the market average. It’s also good to see a healthy gain of 28% in the last year.

Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Over half a decade, Alexander Forbes Group Holdings managed to grow its earnings per share at 6.9% a year. This EPS growth is slower than the share price growth of 13% per year, over the same period. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. That’s not necessarily surprising considering the five-year track record of earnings growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Alexander Forbes Group Holdings’ earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Alexander Forbes Group Holdings, it has a TSR of 228% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

We’re pleased to report that Alexander Forbes Group Holdings shareholders have received a total shareholder return of 50% over one year. And that does include the dividend. That’s better than the annualised return of 27% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Alexander Forbes Group Holdings is showing 2 warning signs in our investment analysis , you should know about…