Investing in Insulet (NASDAQ:PODD) a year ago would have delivered you a 47% gain

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Insulet Corporation (NASDAQ:PODD) share price is up 47% in the last 1 year, clearly besting the market return of around 10% (not including dividends). So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 25% in 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.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the last year Insulet grew its earnings per share (EPS) by 102%. It's fair to say that the share price gain of 47% did not keep pace with the EPS growth. So it seems like the market has cooled on Insulet, despite the growth. Interesting.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Insulet has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Insulet stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Insulet shareholders have received a total shareholder return of 47% over one year. That's better than the annualised return of 3% 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. If you would like to research Insulet in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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.