Investors in Advance Auto Parts (NYSE:AAP) have made a notable return of 53% over the past year

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. For example, the Advance Auto Parts, Inc. (NYSE:AAP) share price is up 51% in the last 1 year, clearly besting the market return of around 21% (not including dividends). So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 28% in the last three years.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Advance Auto Parts

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 Advance Auto Parts grew its earnings per share (EPS) by 43%. This EPS growth is reasonably close to the 51% increase in the share price. So this implies that investor expectations of the company have remained pretty steady. It makes intuitive sense that the share price and EPS would grow at similar rates.

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

We know that Advance Auto Parts has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Advance Auto Parts will grow revenue in the future.

A Different Perspective

It's nice to see that Advance Auto Parts shareholders have received a total shareholder return of 53% over the last year. And that does include the dividend. That's better than the annualised return of 6% 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 Advance Auto Parts better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Advance Auto Parts .

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 US exchanges.

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.

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