When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Fisher & Paykel Healthcare share price has climbed 89% in five years, easily topping the market decline of 5.2% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 26%, including dividends.

The past week has proven to be lucrative for Fisher & Paykel Healthcare investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Fisher & Paykel Healthcare

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Fisher & Paykel Healthcare's earnings per share are down 9.1% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 1.4% dividend yield is unlikely to be propping up the share price. On the other hand, Fisher & Paykel Healthcare's revenue is growing nicely, at a compound rate of 6.8% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fisher & Paykel Healthcare's TSR for the last 5 years was 105%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.