Investors in Lockheed Martin (NYSE:LMT) have made a notable return of 73% over the past three years

Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Lockheed Martin Corporation (NYSE:LMT) share price. It's up 60% over three years, but that is below the market return. Looking at more recent returns, the stock is up 9.3% in a year.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Lockheed Martin

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Lockheed Martin was able to grow its EPS at 0.6% per year over three years, sending the share price higher. In comparison, the 17% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Lockheed Martin's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Lockheed Martin the TSR over the last 3 years was 73%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Lockheed Martin shareholders have received a total shareholder return of 12% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 2 warning signs for Lockheed Martin that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do 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 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.