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. Just take a look at NewMarket Corporation (NYSE:NEU), which is up 61%, over three years, soundly beating the market return of 9.0% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 18% in the last year, including dividends.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

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. 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.

NewMarket was able to grow its EPS at 18% per year over three years, sending the share price higher. Notably, the 17% average annual share price gain matches up nicely with the EPS growth rate. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on NewMarket's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, NewMarket's TSR for the last 3 years was 72%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

NewMarket's TSR for the year was broadly in line with the market average, at 18%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 5%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand NewMarket better, we need to consider many other factors. For example, we've discovered 1 warning sign for NewMarket that you should be aware of before investing here.

But note: NewMarket may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.