TOYA (WSE:TOA) investors are up 12% in the past week, but earnings have declined over the last three years

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. For example, TOYA S.A. (WSE:TOA) shareholders have seen the share price rise 98% over three years, well in excess of the market return (66%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 24%.

Since it's been a strong week for TOYA shareholders, let's have a look at trend of the longer term fundamentals.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the last three years, TOYA failed to grow earnings per share, which fell 1.0% (annualized).

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for TOYA at the moment. So other metrics may hold the key to understanding what is influencing investors.

It may well be that TOYA revenue growth rate of 4.8% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.

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

Take a more thorough look at TOYA's financial health with this free report on its balance sheet.

A Different Perspective

TOYA provided a TSR of 24% over the year. That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 11% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for TOYA you should know about.

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