On average, over time, stock markets tend to rise higher. This makes investing attractive. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Carlton Investments Ltd. (ASX:CIN), share price is up over the last year, but its gain of 12% trails the market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 6.5% in three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Carlton Investments

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and 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 its earnings per share (EPS).

During the last year Carlton Investments grew its earnings per share (EPS) by 3.7%. The share price gain of 12% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

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

Dive deeper into Carlton Investments' key metrics by checking this interactive graph of Carlton Investments's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Carlton Investments, it has a TSR of 16% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Carlton Investments provided a TSR of 16% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Carlton Investments better, we need to consider many other factors. Take risks, for example - Carlton Investments has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

But note: Carlton Investments may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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

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.