AdvanSix's (NYSE:ASIX) 16% CAGR outpaced the company's earnings growth over the same three-year period

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at AdvanSix Inc. (NYSE:ASIX), which is up 53%, over three years, soundly beating the market return of 28% (not including dividends).

Since it's been a strong week for AdvanSix shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for AdvanSix

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

AdvanSix was able to grow its EPS at 49% per year over three years, sending the share price higher. This EPS growth is higher than the 15% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.94.

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

It is of course excellent to see how AdvanSix has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling AdvanSix stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 18% in the twelve months, AdvanSix shareholders did even worse, losing 20% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. It's always interesting to track share price performance over the longer term. But to understand AdvanSix better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with AdvanSix .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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