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 Planet Fitness, Inc. (NYSE:PLNT) share price is up 55% in the last 1 year, clearly besting the market return of around 32% (not including dividends). So that should have shareholders smiling. However, the stock hasn’t done so well in the longer term, with the stock only up 20% in three years.

After a strong gain in the past week, it’s worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Planet Fitness

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Planet Fitness was able to grow EPS by 15% in the last twelve months. This EPS growth is significantly lower than the 55% increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it a year ago. The fairly generous P/E ratio of 53.32 also points to this optimism.

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

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. It might be well worthwhile taking a look at our free report on Planet Fitness’ earnings, revenue and cash flow.

A Different Perspective

It’s good to see that Planet Fitness has rewarded shareholders with a total shareholder return of 55% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 7% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we’ve discovered 2 warning signs for Planet Fitness that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.