OSI Systems' (NASDAQ:OSIS) 14% CAGR outpaced the company's earnings growth over the same three-year period

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 OSI Systems, Inc. (NASDAQ:OSIS) share price is up 47% in the last three years, clearly besting the market return of around 15% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 19% in the last year.

The past week has proven to be lucrative for OSI Systems investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for OSI Systems

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 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, OSI Systems achieved compound earnings per share growth of 29% per year. The average annual share price increase of 14% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that OSI Systems has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

OSI Systems provided a TSR of 19% 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 6% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand OSI Systems better, we need to consider many other factors. For instance, we've identified 2 warning signs for OSI Systems (1 is a bit unpleasant) that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.