Administradora de Fondos de Pensiones Habitat's (SNSE:HABITAT) three-year total shareholder returns outpace the underlying earnings growth

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Administradora de Fondos de Pensiones Habitat S.A. (SNSE:HABITAT) share price has soared 219% in the last three years. How nice for those who held the stock! Also pleasing for shareholders was the 31% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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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 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.

Administradora de Fondos de Pensiones Habitat was able to grow its EPS at 22% per year over three years, sending the share price higher. This EPS growth is lower than the 47% 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. That's not necessarily surprising considering the three-year track record of earnings growth.

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

Dive deeper into Administradora de Fondos de Pensiones Habitat's key metrics by checking this interactive graph of Administradora de Fondos de Pensiones Habitat's earnings, revenue and cash flow.

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, Administradora de Fondos de Pensiones Habitat's TSR for the last 3 years was 394%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Administradora de Fondos de Pensiones Habitat has rewarded shareholders with a total shareholder return of 84% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 64%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with 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. For instance, we've identified 1 warning sign for Administradora de Fondos de Pensiones Habitat that you should be aware of.

We will like Administradora de Fondos de Pensiones Habitat better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.