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By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, Singapore Technologies Engineering Ltd (SGX:S63) shareholders have seen the share price rise 16% over three years, well in excess of the market return (12%, not including dividends).

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Singapore Technologies Engineering

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

Over the last three years, Singapore Technologies Engineering failed to grow earnings per share, which fell 2.5% (annualized).

While EPS is down but the share price is moving up, neither move is particularly drastic, suggesting the market was previously too pessimistic. Ultimately, though, we don't think it can maintain share price gains without turning around the EPS growth.

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

Dive deeper into Singapore Technologies Engineering's key metrics by checking this interactive graph of Singapore Technologies Engineering's earnings, revenue and cash flow.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Singapore Technologies Engineering's TSR for the last 3 years was 32%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

While the broader market gained around 2.4% in the last year, Singapore Technologies Engineering shareholders lost 4.8% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Singapore Technologies Engineering has 2 warning signs we think 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 Singaporean exchanges.

Find out whether Singapore Technologies Engineering is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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Those who invested in Singapore Technologies Engineering (SGX:S63) three years ago are up 32% - Simply Wall St