AIC Mines' (ASX:A1M) 75% return outpaced the company's earnings growth over the same one-year period

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the AIC Mines Limited (ASX:A1M) share price is up 75% in the last 1 year, clearly besting the market return of around 6.1% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! And shareholders have also done well over the long term, with an increase of 30% in the last three years.

The past week has proven to be lucrative for AIC Mines investors, so let's see if fundamentals drove the company's one-year performance.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

AIC Mines was able to grow EPS by 59% in the last twelve months. The share price gain of 75% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of AIC Mines' earnings, revenue and cash flow.

A Different Perspective

It's nice to see that AIC Mines shareholders have received a total shareholder return of 75% over the last year. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for AIC Mines you should know about.

AIC Mines is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.