These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. To wit, the Advanced Emissions Solutions, Inc. (NASDAQ:ADES) share price is 39% higher than it was a year ago, much better than the market return of around 23% (not including dividends) in the same period. So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 39% in three years.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Advanced Emissions Solutions

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last year Advanced Emissions Solutions grew its earnings per share, moving from a loss to a profit.

The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Advanced Emissions Solutions' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Advanced Emissions Solutions shareholders have received a total shareholder return of 39% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.4% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 - Advanced Emissions Solutions has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course Advanced Emissions Solutions may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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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