If You Had Bought Australia and New Zealand Banking Group's (ASX:ANZ) Shares Three Years Ago You Would Be Down 42%

While it may not be enough for some shareholders, we think it is good to see the Australia and New Zealand Banking Group Limited (ASX:ANZ) share price up 10% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 42% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

See our latest analysis for Australia and New Zealand Banking Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Australia and New Zealand Banking Group saw its EPS decline at a compound rate of 6.6% per year, over the last three years. The share price decline of 16% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 10.54.

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

This free interactive report on Australia and New Zealand Banking Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. In the case of Australia and New Zealand Banking Group, it has a TSR of -32% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 2.8% in the twelve months, Australia and New Zealand Banking Group shareholders did even worse, losing 33% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4.1% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Australia and New Zealand Banking Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Australia and New Zealand Banking Group (of which 1 is potentially serious!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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This article by Simply Wall St is general in nature. 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.
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