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, Aviat Networks, Inc. (NASDAQ:AVNW) shareholders have seen the share price rise 55% over three years, well in excess of the market return (40%, not including dividends).
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Aviat Networks became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Aviat Networks has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Investors in Aviat Networks had a tough year, with a total loss of 14%, against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course Aviat Networks may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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 firstname.lastname@example.org. 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.