Glossary5YR Performance vs S&P

5YR Performance vs S&P

Tier 3 · Market Sentiment · 0.5× weight

Did this stock beat just buying the index over 5 years?

Definition

Compares the stock's 5-year total return against the S&P 500 benchmark over the identical period. Sustained outperformance indicates that the equity has generated alpha — excess returns above the passive benchmark. Used as a long-term momentum and historical validation overlay rather than a primary fundamental driver.

Formula

Relative Performance = Stock 5YR Total Return % − S&P 500 5YR Total Return %

Why It Matters

Five years of market outperformance is signal, not noise. Single-year blowouts can be luck or a favorable macro environment. Consistently beating the index over a full cycle requires a durable competitive advantage and disciplined capital allocation.

Sector Adjustments

The S&P 500 is the universal benchmark regardless of sector. The question is always the same: did shareholders get compensated for taking individual stock risk versus just owning the market?

Scoring Breakdown

10 / 10

Perfect

Outperforming S&P 500 by +20pp or more over 5 years

5 / 10

Mid

Roughly in line with the S&P 500 benchmark

0 / 10

Fail

Underperforming S&P 500 by -20pp or more

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