Investors in Medacta Group (VTX:MOVE) have seen respectable returns of 97% over the past five years

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, the Medacta Group SA (VTX:MOVE) share price is up 94% in the last 5 years, clearly besting the market return of around 24% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 4.0% in the last year, including dividends.

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.

Check out our latest analysis for Medacta Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, Medacta Group managed to grow its earnings per share at 21% a year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

We know that Medacta Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

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. We note that for Medacta Group the TSR over the last 5 years was 97%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Medacta Group provided a TSR of 4.0% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 15% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Case in point: We've spotted 1 warning sign for Medacta Group you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.