National World's (LON:NWOR) investors will be pleased with their favorable 82% return over the last three years

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 National World Plc (LON:NWOR), which is up 82%, over three years, soundly beating the market decline of 3.9% (not including dividends).

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

Check out our latest analysis for National World

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During three years of share price growth, National World moved from a loss to profitability. So we would expect a higher share price over the period.

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

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

The last twelve months weren't great for National World shares, which performed worse than the market, costing holders 19%. Meanwhile, the broader market slid about 2.8%, likely weighing on the stock. Investors are up over three years, booking 22% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. It's always interesting to track share price performance over the longer term. But to understand National World better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with National World (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here