Investors one-year returns in Fnac Darty (EPA:FNAC) have grown faster than the company's underlying earnings growth

We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Fnac Darty SA (EPA:FNAC), share price is up over the last year, but its gain of 15% trails the market return. In contrast, the longer term returns are negative, since the share price is 12% lower than it was three years ago.

While the stock has fallen 4.9% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Fnac Darty

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.

Fnac Darty was able to grow EPS by 141% in the last twelve months. It's fair to say that the share price gain of 15% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Fnac Darty as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.66.

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

We know that Fnac Darty has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Fnac Darty the TSR over the last 1 year was 17%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Fnac Darty provided a TSR of 17% over the last twelve months. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 1.3% per year, over five years. It could well be that the business is stabilizing. 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. To that end, you should be aware of the 1 warning sign we've spotted with Fnac Darty .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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