Earnings growth outpaced the 18% return delivered to Lisi (EPA:FII) shareholders over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Lisi S.A. (EPA:FII) share price is up 16% in the last 1 year, clearly besting the market decline of around 4.8% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 8.8% in the last three years.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Lisi

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last year Lisi grew its earnings per share (EPS) by 62%. It's fair to say that the share price gain of 16% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Lisi as it was before. This could be an opportunity.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Lisi has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Lisi's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Lisi shareholders have received a total shareholder return of 18% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 1.3%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Lisi better, we need to consider many other factors. Take risks, for example - Lisi has 1 warning sign we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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