Investors in Banco Santander-Chile (SNSE:BSANTANDER) have seen respectable returns of 62% over the past three years

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, the Banco Santander-Chile (SNSE:BSANTANDER) share price is up 37% in the last three years, clearly besting the market decline of around 51% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 13% in the last year, including dividends.

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.

See our latest analysis for Banco Santander-Chile

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Banco Santander-Chile was able to grow its EPS at 0.5% per year over three years, sending the share price higher. This EPS growth is lower than the 11% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Banco Santander-Chile has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Banco Santander-Chile will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Banco Santander-Chile's TSR for the last 3 years was 62%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Banco Santander-Chile's TSR for the year was broadly in line with the market average, at 13%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 7% 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. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Banco Santander-Chile you should know about.

Of course Banco Santander-Chile 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 Chilean 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.