Passive investing in index funds can generate returns that roughly match the overall market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the National Beverage Corp. (NASDAQ:FIZZ) share price is up 76% in the last five years, slightly above the market return. Zooming in, the stock is up a respectable 13% in the last year.

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

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

During five years of share price growth, National Beverage actually saw its EPS drop 0.4% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We note that the dividend is higher than it was previously - always nice to see. Maybe dividend investors have helped support the share price. We'd posit that the revenue growth over the last five years, of 4.0% per year, would encourage people to invest.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that National Beverage has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think National Beverage will earn in the future (free profit forecasts).

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, National Beverage's TSR for the last 5 years was 99%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

National Beverage shareholders gained a total return of 13% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 15% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for National Beverage you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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