Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Profire Energy, Inc. (NASDAQ:PFIE) share price is up 59% in the last 1 year, clearly besting the market return of around 24% (not including dividends). So that should have shareholders smiling. Also impressive, the stock is up 45% over three years, making long term shareholders happy, too.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Profire Energy

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).

During the last year Profire Energy grew its earnings per share (EPS) by 172%. It's fair to say that the share price gain of 59% did not keep pace with the EPS growth. So it seems like the market has cooled on Profire Energy, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 7.78.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Profire Energy has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Profire Energy's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Profire Energy has rewarded shareholders with a total shareholder return of 59% in the last twelve months. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Profire Energy better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Profire Energy (of which 1 shouldn't be ignored!) you should know about.

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 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.