Investing in Viva Energy Group (ASX:VEA) three years ago would have delivered you a 112% gain

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Viva Energy Group Limited (ASX:VEA) shareholders have seen the share price rise 77% over three years, well in excess of the market return (8.9%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 34% in the last year , including dividends .

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

View our latest analysis for Viva Energy Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, Viva Energy Group achieved compound earnings per share growth of 52% per year. However, extraordinary items have impacted recent EPS numbers. This EPS growth is higher than the 21% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Viva Energy Group's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Viva Energy Group the TSR over the last 3 years was 112%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Viva Energy Group shareholders have received a total shareholder return of 34% over the last year. Of course, that includes the dividend. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Viva Energy Group better, we need to consider many other factors. For example, we've discovered 2 warning signs for Viva Energy Group (1 shouldn't be ignored!) that you should be aware of before investing here.

Viva Energy Group is not the only stock that insiders are buying. 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 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.