Investors in OFX Group (ASX:OFX) have seen decent returns of 64% 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 OFX Group Limited (ASX:OFX) share price is up 64% in the last three years, clearly besting the market return of around 2.3% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 13% in the last year.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for OFX Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, OFX Group achieved compound earnings per share growth of 38% per year. The average annual share price increase of 18% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

earnings-per-share-growth

It is of course excellent to see how OFX Group has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

OFX Group's TSR for the year was broadly in line with the market average, at 13%. 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 9%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - OFX Group has 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.

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