By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, Graham Holdings Company (NYSE:GHC) shareholders have seen the share price rise 65% over three years, well in excess of the market return (22%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 44%, including dividends.

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 Graham Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 the three years of share price growth, Graham Holdings actually saw its earnings per share (EPS) drop 20% per year.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.

The modest 0.7% dividend yield is unlikely to be propping up the share price. It could be that the revenue growth of 14% per year is viewed as evidence that Graham Holdings is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Graham Holdings stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Graham Holdings the TSR over the last 3 years was 70%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Graham Holdings shareholders have received a total shareholder return of 44% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 9%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 - Graham Holdings has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Graham Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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