Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term Kimball Electronics, Inc. (NASDAQ:KE) shareholders have enjoyed a 83% share price rise over the last half decade, well in excess of the market return of around 67% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 47% in the last year.

Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Kimball Electronics actually saw its EPS drop 2.7% per year.

So it’s hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it’s worth taking a look at other metrics to try to understand the share price movements.

In contrast revenue growth of 6.3% per year is probably viewed as evidence that Kimball Electronics is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Kimball Electronics has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Kimball Electronics will earn in the future (free profit forecasts).

It’s nice to see that Kimball Electronics shareholders have received a total shareholder return of 47% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 13% per year), it would seem that the stock’s performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It’s always interesting to track share price performance over the longer term. But to understand Kimball Electronics better, we need to consider many other factors. For instance, we’ve identified 1 warning sign for Kimball Electronics that you should be aware of.