Passive investing in index funds can generate returns that roughly match the overall market. But you can do better than that by choosing better-than-average stocks (as part of a diversified portfolio). Namely, the Iron Mountain Incorporated The stock price (NYSE: IRM) is 52% higher than a year ago, far better than the market yield of around 33% (excluding dividends) over the same time period. This should therefore make shareholders smile. However, long-term returns have not been so impressive, with the stock only rising 25% in the past three years.

Check out our latest review for Iron Mountain

While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just the underlying performance of the company. An imperfect but straightforward way to consider how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.

Iron Mountain has been able to increase its EPS by 7.1% over the past twelve months. This EPS growth is significantly lower than the 52% increase in the share price. It is therefore fair to assume that the market has a better opinion of the company than a year ago.

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

This free Iron Mountain’s interactive earnings, revenue and cash flow report is a great place to start if you want to dig deeper into the stock.

What about dividends?

When considering investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin- off updated. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. As it turns out, Iron Mountain’s TSR for the past year was 63%, which exceeds the share price return mentioned earlier. This is largely the result of his dividend payments!

A different perspective

It is good to see that Iron Mountain has rewarded its shareholders with a total shareholder return of 63% over the past twelve months. And that includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 11% per year), it seems that the performance of the stock has improved in recent times. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Concrete example: we have spotted 4 warning signs for Iron Mountain you must be aware of this, and one of them must not be ignored.

For those who like to find winning investments this free list of growing companies with recent insider buys, might be just the ticket.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the US stock exchanges.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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