Investors in Great-West Lifeco (TSE:GWO) have seen notable returns of 90% over the past five years

If you want to compound wealth in the stock market, you can do so by buying an index fund. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the Great-West Lifeco Inc. (TSE:GWO) share price is 44% higher than it was five years ago, which is more than the market average. It's also good to see that the stock is up 12% in a year.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Great-West Lifeco

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Great-West Lifeco achieved compound earnings per share (EPS) growth of 9.1% per year. This EPS growth is higher than the 8% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.25.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Great-West Lifeco has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Great-West Lifeco's TSR for the last 5 years was 90%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Great-West Lifeco's TSR for the year was broadly in line with the market average, at 18%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 14% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. Before spending more time on Great-West Lifeco it might be wise to click here to see if insiders have been buying or selling shares.

For those who like to find winning investments this free list of undervalued 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 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.