Those who invested in Alcon (VTX:ALC) three years ago are up 25%

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 Alcon Inc. (VTX:ALC), which is up 24%, over three years, soundly beating the market return of 17% (not 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.

Check out our latest analysis for Alcon

While Alcon made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 3 years Alcon saw its revenue grow at 8.4% per year. That's pretty nice growth. While the share price has done well, compounding at 7% yearly, over three years, that move doesn't seem over the top. Of course, valuation is quite sensitive to the rate of growth. Keep in mind that the strength of the balance sheet impacts the options open to the company.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Alcon is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

Alcon shareholders are down 12% for the year (even including dividends), falling short of the market return. Meanwhile, the broader market slid about 4.1%, likely weighing on the stock. Fortunately the longer term story is brighter, with total returns averaging about 8% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. 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. For instance, we've identified 1 warning sign for Alcon that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Swiss exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.