The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Mercury Systems, Inc. (NASDAQ:MRCY) share price is 66% higher than it was a year ago, much better than the market return of around 8.1% (not including dividends) in the same period. That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 31% in three years.

Since the stock has added US$144m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Mercury Systems

Because Mercury Systems made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year Mercury Systems saw its revenue shrink by 1.3%. Despite the lack of revenue growth, the stock has returned a solid 66% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that Mercury Systems shareholders have received a total shareholder return of 66% over the last year. There's no doubt those recent returns are much better than the TSR loss of 5% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before spending more time on Mercury Systems it might be wise to click here to see if insiders have been buying or selling shares.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.