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By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, Arman Financial Services Limited (NSE:ARMANFIN) shareholders have seen the share price rise 40% over three years, well in excess of the market return (11%, not including dividends).
Check out our latest analysis for Arman Financial Services
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During three years of share price growth, Arman Financial Services achieved compound earnings per share growth of 40% per year. This EPS growth is higher than the 12% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Arman Financial Services's earnings, revenue and cash flow.
A Different Perspective
Arman Financial Services shareholders may not have made money over the last year, but their total loss of 9.1% ( including dividends) isn't as bad as the market loss of around 9.1%. Shareholders who have held for three years might be relatively sanguine about the recent weakness, given they have made 12% per year for three years. Given the three year returns are better than the return over the last year, it might be that the broader market has weighed on the stock recently. Is Arman Financial Services cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Arman Financial Services 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 IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.