If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Cirrus Logic, Inc. (NASDAQ:CRUS) share price is 56% higher than it was a year ago, much better than the market return of around 31% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Also impressive, the stock is up 40% over three years, making long term shareholders happy, too.

In light of the stock dropping 9.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Cirrus Logic was able to grow EPS by 103% in the last twelve months. It's fair to say that the share price gain of 56% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Cirrus Logic as it was before. This could be an opportunity.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Cirrus Logic has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Cirrus Logic will grow revenue in the future.

A Different Perspective

It's good to see that Cirrus Logic has rewarded shareholders with a total shareholder return of 56% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% 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. 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 instance, we've identified 1 warning sign for Cirrus Logic that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.