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 Frencken Group Limited (SGX:E28) shareholders have enjoyed a 28% share price rise over the last half decade, well in excess of the market return of around 19% (not including dividends).

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

We check all companies for important risks. See what we found for Frencken Group in our free report.

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.

Frencken Group’s earnings per share are down 2.8% per year, despite strong share price performance over five years.

By glancing at these numbers, we’d posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it’s worth taking a look at other metrics to try to understand the share price movements.

On the other hand, Frencken Group’s revenue is growing nicely, at a compound rate of 4.3% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

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

It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Frencken Group in this interactive graph of future profit estimates.

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Frencken Group, it has a TSR of 50% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.