Earnings growth of 6.5% over 1 year hasn't been enough to translate into positive returns for IGM Financial (TSE:IGM) shareholders

It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by IGM Financial Inc. (TSE:IGM) shareholders over the last year, as the share price declined 17%. That falls noticeably short of the market decline of around 1.1%. Longer term investors have fared much better, since the share price is up 0.7% in three years.

If the past week is anything to go by, investor sentiment for IGM Financial isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for IGM Financial

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Even though the IGM Financial share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.

IGM Financial's dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, IGM Financial's TSR for the last 1 year was -12%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 1.1% in the last year, IGM Financial shareholders lost 12% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand IGM Financial better, we need to consider many other factors. Take risks, for example - IGM Financial has 1 warning sign we think you should be aware of.

We will like IGM Financial better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.