By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, NMI Holdings, Inc. (NASDAQ:NMIH) shareholders have seen the share price rise 78% over three years, well in excess of the market return (15%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 33% in the last year.

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

NMI Holdings was able to grow its EPS at 21% per year over three years, sending the share price higher. Notably, the 21% average annual share price gain matches up nicely with the EPS growth rate. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.

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

We know that NMI Holdings has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

NMI Holdings' TSR for the year was broadly in line with the market average, at 33%. 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 3%. 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. Before spending more time on NMI Holdings it might be wise to click here to see if insiders have been buying or selling shares.

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.