Naftna Industrija Srbije a.d (BELEX:NIIS) rises 4.9% this week, taking three-year gains to 41%

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Naftna Industrija Srbije a.d. (BELEX:NIIS) shareholders have seen the share price rise 41% over three years, well in excess of the market return (6.2%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 2.3%.

The past week has proven to be lucrative for Naftna Industrija Srbije a.d investors, so let's see if fundamentals drove the company's three-year performance.

View our latest analysis for Naftna Industrija Srbije a.d

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. 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.

Naftna Industrija Srbije a.d became profitable within the last three years. So we would expect a higher share price over the period.

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

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

A Different Perspective

Naftna Industrija Srbije a.d shareholders are up 2.3% for the year (even including dividends). But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 5% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Naftna Industrija Srbije a.d better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Naftna Industrija Srbije a.d , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 Serbian 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.