If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the IDEXX Laboratories, Inc. (NASDAQ:IDXX) share price is up 80% in the last five years, slightly above the market return. Also positive is the 7.0% share price rise over the last year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for IDEXX Laboratories

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 five years of share price growth, IDEXX Laboratories achieved compound earnings per share (EPS) growth of 17% per year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

It might be well worthwhile taking a look at our free report on IDEXX Laboratories' earnings, revenue and cash flow.

A Different Perspective

IDEXX Laboratories provided a TSR of 7.0% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 12% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.