These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Emera Incorporated (TSE:EMA) share price is 28% higher than it was a year ago, much better than the market return of around 22% (not including dividends) in the same period. That’s a solid performance by our standards! The longer term returns are positive, with the share price up 25% in three years.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During the last year Emera grew its earnings per share (EPS) by 15%. The share price gain of 28% certainly outpaced the EPS growth. So it’s fair to assume the market has a higher opinion of the business than it a year ago.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Emera’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Emera’s TSR for the last 1 year was 35%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

It’s good to see that Emera has rewarded shareholders with a total shareholder return of 35% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 9%. 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. 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. Even so, be aware that Emera is showing 3 warning signs in our investment analysis , and 2 of those are potentially serious…