Investors in Demant (CPH:DEMANT) have seen notable returns of 42% over the past three years

Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the Demant A/S (CPH:DEMANT) share price is up 42% in the last three years, that falls short of the market return. In the last year the stock has gained 12%.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Demant

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Demant was able to grow its EPS at 48% per year over three years, sending the share price higher. The average annual share price increase of 12% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Demant has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Demant's financial health with this free report on its balance sheet.

A Different Perspective

Demant provided a TSR of 12% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 0.8% per year over five year. This could indicate that the company is winning over new investors, as it pursues its 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Demant , and understanding them should be part of your investment process.

We will like Demant better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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