By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at init innovation in traffic systems SE (ETR:IXX), which is up 87%, over three years, soundly beating the market return of 25% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 23%, including dividends.

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

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To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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 three years of share price growth, init innovation in traffic systems achieved compound earnings per share growth of 11% per year. This EPS growth is lower than the 23% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That’s not necessarily surprising considering the three-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on init innovation in traffic systems’ 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, init innovation in traffic systems’ TSR for the last 3 years was 99%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

It’s good to see that init innovation in traffic systems has rewarded shareholders with a total shareholder return of 23% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock’s performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For instance, we’ve identified 1 warning sign for init innovation in traffic systems that you should be aware of.