By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, Suncorp Group Limited (ASX:SUN) shareholders have seen the share price rise 45% over three years, well in excess of the market return (7.1%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 36% in the last year, including dividends.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Suncorp Group

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years of share price growth, Suncorp Group actually saw its earnings per share (EPS) drop 3.0% per year.

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Suncorp Group at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We note that the dividend is higher than it was preciously, so that may have assisted the share price. It could be that the company is reaching maturity and dividend investors are buying for the yield. On top of that, revenue grew at a rate of 6.0% per year, and it's likely investors interpret that as pointing to a brighter future.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail). earnings-and-revenue-growth

Suncorp Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Suncorp Group in this interactivegraph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Suncorp Group the TSR over the last 3 years was 64%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!



A Different Perspective

It's nice to see that Suncorp Group shareholders have received a total shareholder return of 36% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Suncorp Group better, we need to consider many other factors. To that end, you should be aware of the  1 warning sign  we've spotted with Suncorp Group .

If you are like me, then you will not want to miss this freelist 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 Australian 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.