Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Frontdoor, Inc. (NASDAQ:FTDR) share price is up 70% in the last 1 year, clearly besting the market return of around 35% (not including dividends). So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 19% in the last three years.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year Frontdoor grew its earnings per share (EPS) by 68%. The similarity between the EPS growth and the 70% share price gain really stands out. So this implies that investor expectations of the company have remained pretty steady. We don't think its coincidental that the share price is growing at a similar rate to the earnings per share.

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

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

A Different Perspective

It's nice to see that Frontdoor shareholders have received a total shareholder return of 70% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.5% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Frontdoor that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.