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. Just take a look at MiMedx Group, Inc. (NASDAQ:MDXG), which is up 84%, over three years, soundly beating the market return of 29% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 9.9%.

Although MiMedx Group has shed US$75m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for MiMedx Group

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 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 three years of share price growth, MiMedx Group moved from a loss to profitability. So we would expect a higher share price over the period.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how MiMedx Group has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at MiMedx Group's financial health with this free report on its balance sheet.

A Different Perspective

MiMedx Group provided a TSR of 9.9% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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 for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with MiMedx Group (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.