The total return for Vaudoise Assurances Holding (VTX:VAHN) investors has risen faster than earnings growth over the last five years

The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Vaudoise Assurances Holding SA (VTX:VAHN), since the last five years saw the share price fall 16%.

Since Vaudoise Assurances Holding has shed CHF49m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Vaudoise Assurances Holding

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During the unfortunate half decade during which the share price slipped, Vaudoise Assurances Holding actually saw its earnings per share (EPS) improve by 1.1% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Given EPS is up and the share price is down, it's clear the market is more concerned about the business than it was previously. Having said that, if the EPS gains continue we'd expect the share price to improve, longer term.

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

It might be well worthwhile taking a look at our free report on Vaudoise Assurances Holding'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 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, Vaudoise Assurances Holding's TSR for the last 5 years was 2.6%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Vaudoise Assurances Holding shareholders are up 0.6% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 0.5% per year over five year. This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Vaudoise Assurances Holding .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com