Investors in Check Point Software Technologies (NASDAQ:CHKP) have seen decent returns of 37% over the past three years

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Check Point Software Technologies Ltd. (NASDAQ:CHKP) share price is up 37% in the last three years, clearly besting the market return of around 9.1% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 28%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Check Point Software Technologies

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, Check Point Software Technologies achieved compound earnings per share growth of 7.3% per year. In comparison, the 11% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Check Point Software Technologies' TSR for the year was broadly in line with the market average, at 28%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 6%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. Before forming an opinion on Check Point Software Technologies you might want to consider these 3 valuation metrics.

We will like Check Point Software Technologies better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.