One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, the aim of the game is to pick stocks that do better than an index fund. Zurn Elkay Water Solutions Corporation (NYSE:ZWS) has done well over the last year, with the stock price up 33% beating the market return of 32% (not including dividends). However, the longer term returns haven't been so impressive, with the stock up just 9.3% in the last three years.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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 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).

Zurn Elkay Water Solutions was able to grow EPS by 37% in the last twelve months. We note that the earnings per share growth isn't far from the share price growth (of 33%). That suggests that the market sentiment around the company hasn't changed much over that time. It looks like the share price is responding to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Zurn Elkay Water Solutions 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

Zurn Elkay Water Solutions provided a TSR of 34% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 22% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Zurn Elkay Water Solutions better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Zurn Elkay Water Solutions .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.