By buying an index fund, investors can approximate the market’s average return. But many of us dare to dream of big returns, and build a portfolio ourselves. For example, the Avarga Ltd (SGX:U09) share price is up 71% over the past three years, clearly besting the market return of around 6.8% (not including dividends).

With this in mind, it’s worth looking at whether the company’s underlying fundamentals are the drivers of long-term performance or whether there are some anomalies.

Check out our latest analysis for Avarga

Although the efficient market hypothesis continues to be taught by some, it has been demonstrated that markets are hyper-reactive dynamic systems and that 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 earnings per share (EPS).

Over the three years of share price growth, Avarga achieved compound earnings per share of 18% per year. We note that 20% annual (average) share price growth is not far off from the EPS growth rate. Coincidence? Probably not. This suggests that market sentiment around the company hasn’t changed much over that period. In contrast, share prices have reasonably reflected EPS growth.

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

Earnings-per-share growth

Earnings-per-share growth

It might be good to have a look at it for free Avarga’s earnings, revenue and cash flow statement.

What about Total Shareholder Return (TSR)?

Investors should note that there is a difference between Avarga’s total shareholder return (TSR) and its share price change, which we covered above. TSR seeks to collect the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital offered to shareholders. Dividends have been really beneficial to Averga shareholders, and that cash payout has contributed to why its TSR of 93% over the past 3 years is better than the share price return.

A different perspective

Investors in Avarga had a tough year, with a total loss of 14%, against a market gain of about 0.5%. However, remember that even the best stocks will sometimes underperform the market over a twelve-month period. Long-term investors won’t be too upset, as they’ll earn 5% per year, over five years. If fundamentals continue to indicate long-term sustainable growth, the current sell-off may be an opportunity worth considering. You might want to evaluate this data-rich visualization of its revenue, revenue and cash flow.

But note: Avarga may not be the best stock to buy. So give it a peek for free List of attractive companies with past earnings growth (and further growth forecasts).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks currently traded on the Singapore Exchange.

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

This article on Simply Wall St. is general in nature. We only provide commentary based on historical data and analyst forecasts using an unbiased approach, 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 into account 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 recent price-sensitive company announcements or qualitative factors. Simply Wall St. has no position in any of the stocks mentioned.

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