Axalta Coating Systems' (NYSE:AXTA) underlying earnings growth outpaced the return generated for shareholders over the past three years

Investors can buy low cost index fund if they want to receive the average market return. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Axalta Coating Systems Ltd. (NYSE:AXTA) share price is up 29% in the last three years, that falls short of the market return. Disappointingly, the share price is down 21% in the last year.

Although Axalta Coating Systems has shed US$446m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Axalta Coating Systems was able to grow its EPS at 31% per year over three years, sending the share price higher. This EPS growth is higher than the 9% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Axalta Coating Systems has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Investors in Axalta Coating Systems had a tough year, with a total loss of 21%, against a market gain of about 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Axalta Coating Systems better, we need to consider many other factors. Even so, be aware that Axalta Coating Systems is showing 1 warning sign in our investment analysis , you should know about...

But note: Axalta Coating Systems 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.