By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Haemonetics Corporation (NYSE:HAE) shareholders have seen the share price rise 42% over three years, well in excess of the market return (16%, not including dividends).

While the stock has fallen 6.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Haemonetics

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Haemonetics achieved compound earnings per share growth of 59% per year. The average annual share price increase of 12% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Haemonetics has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Haemonetics stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Haemonetics shareholders are down 10% for the year, but the market itself is up 24%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we've discovered 2 warning signs for Haemonetics (1 is significant!) that you should be aware of before investing here.

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.