Investing in Swiss Re (VTX:SREN) three years ago would have delivered you a 49% gain

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Swiss Re AG (VTX:SREN), which is up 22%, over three years, soundly beating the market return of 9.8% (not including dividends).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Swiss Re

SWOT Analysis for Swiss Re

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Swiss Re moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

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

We know that Swiss Re has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Swiss Re the TSR over the last 3 years was 49%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Swiss Re shareholders have received a total shareholder return of 26% over one year. Of course, that includes the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Swiss Re is showing 1 warning sign in our investment analysis , 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 Swiss 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.