The 4.6% return this week takes Avantor's (NYSE:AVTR) shareholders five-year gains to 100%

If you want to compound wealth in the stock market, you can do so by buying an index fund. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Avantor, Inc. (NYSE:AVTR) share price is 100% higher than it was five years ago, which is more than the market average. We're also happy to report the stock is up a healthy 28% in the last year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Avantor

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last half decade, Avantor became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Avantor share price is down 37% in the last three years. Meanwhile, EPS is up 4.8% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -14% a year for three years.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Avantor provided a TSR of 28% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 15% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Avantor better, we need to consider many other factors. For example, we've discovered 1 warning sign for Avantor that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.