Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Bakkavor Group plc (LON:BAKK) share price is 42% higher than it was a year ago, much better than the market return of around 4.4% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! However, the longer term returns haven't been so impressive, with the stock up just 4.1% in the last three years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

View our latest analysis for Bakkavor Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Bakkavor Group was able to grow EPS by 324% in the last twelve months. This EPS growth is significantly higher than the 42% increase in the share price. So it seems like the market has cooled on Bakkavor Group, despite the growth. Interesting.

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

We know that Bakkavor Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Bakkavor Group will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bakkavor Group the TSR over the last 1 year was 52%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Bakkavor Group shareholders have received a total shareholder return of 52% over the last year. That's including the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 1 warning sign for Bakkavor Group you should be aware of.