If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the ChampionX Corporation (NASDAQ:CHX) share price is up 50% in the last 1 year, clearly besting the market decline of around 8.2% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! It is also impressive that the stock is up 35% over three years, adding to the sense that it is a real winner.

Although ChampionX has shed US$195m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for ChampionX

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 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 ChampionX grew its earnings per share (EPS) by 37%. This EPS growth is significantly lower than the 50% increase in the share price. This indicates that the market is now more optimistic about the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

It's nice to see that ChampionX shareholders have gained 51% (in total) over the last year. That's including the dividend. That's better than the annualized TSR of 11% over the last three years. Given the track record of solid returns over varying time frames, it might be worth putting ChampionX on your watchlist. It's always interesting to track share price performance over the longer term. But to understand ChampionX better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with ChampionX , and understanding them should be part of your investment process.

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 US 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here