Investors more bullish on Aptiv (NYSE:APTV) this week as stock rallies 6.7%, despite earnings trending downwards over past three years

One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Aptiv PLC (NYSE:APTV), which is up 41%, over three years, soundly beating the market return of 33% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 23%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Aptiv

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.

During the three years of share price growth, Aptiv actually saw its earnings per share (EPS) drop 37% per year.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It could be that the revenue growth of 12% per year is viewed as evidence that Aptiv is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Aptiv is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Aptiv in this interactive graph of future profit estimates.

A Different Perspective

It's good to see that Aptiv has rewarded shareholders with a total shareholder return of 23% in the last twelve months. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Aptiv is showing 2 warning signs in our investment analysis , you should know about...

But note: Aptiv may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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