Despite lower earnings than five years ago, Aviva (LON:AV.) investors are up 45% since then

It's possible to achieve returns close to the market-weighted average return by buying an index fund. But even in a market-beating portfolio, some stocks will lag the market. While the Aviva plc (LON:AV.) share price is down 19% over half a decade, the total return to shareholders (which includes dividends) was 45%. That's better than the market which returned 23% over the same time. And the share price decline continued over the last week, dropping some 7.4%.

Since Aviva has shed UK£1.0b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Aviva

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Aviva became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower. On top of that, revenue has declined by 25% per year over the half decade; that could be a red flag for some investors.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Aviva in this interactive graph 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Aviva's TSR for the last 5 years was 45%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Aviva shareholders have received a total shareholder return of 16% over one year. That's including the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Aviva that you should be aware of before investing here.

Aviva is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.