Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the DocuSign, Inc. (NASDAQ:DOCU) share price is 56% higher than it was a year ago, much better than the market return of around 23% (not including dividends) in the same period. That's a solid performance by our standards! Unfortunately the longer term returns are not so good, with the stock falling 40% in the last three years.

In light of the stock dropping 3.5% 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.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year DocuSign saw its earnings per share (EPS) increase strongly. We don't think the exact number is a good guide to the sustainable growth rate, but we do think this sort of increase is impressive. So we're unsurprised to see the share price gaining ground. To us, inflection points like this are the best time to take a close look at a stock.

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 DocuSign has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that DocuSign shareholders have received a total shareholder return of 56% over the last year. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand DocuSign better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for DocuSign you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.