The one-year returns for Frontdoor's (NASDAQ:FTDR) shareholders have been favorable, yet its earnings growth was even better

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Frontdoor, Inc. (NASDAQ:FTDR) share price is 48% higher than it was a year ago, much better than the market return of around 25% (not including dividends) in the same period. So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 12% in three years.

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

Check out our latest analysis for Frontdoor

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 last year Frontdoor grew its earnings per share (EPS) by 68%. This EPS growth is significantly higher than the 48% increase in the share price. So it seems like the market has cooled on Frontdoor, despite the growth. Interesting.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Frontdoor has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Frontdoor's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Frontdoor shareholders have received a total shareholder return of 48% over the last year. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 2 warning signs for Frontdoor you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.