Those who invested in Royal Bank of Canada (TSE:RY) five years ago are up 57%

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Royal Bank of Canada (TSE:RY) has fallen short of that second goal, with a share price rise of 29% over five years, which is below the market return. Unfortunately the share price is down 3.4% in the last year.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Royal Bank of Canada

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Royal Bank of Canada managed to grow its earnings per share at 4.5% a year. This EPS growth is reasonably close to the 5% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Royal Bank of Canada's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Royal Bank of Canada, it has a TSR of 57% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Royal Bank of Canada shareholders are up 0.8% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 9% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before forming an opinion on Royal Bank of Canada you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

Of course Royal Bank of Canada may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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