While shareholders of Amadeus IT Group (BME:AMS) are in the black over 3 years, those who bought a week ago aren't so fortunate

Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Amadeus IT Group, S.A. (BME:AMS) share price. It's up 17% over three years, but that is below the market return. In the last year the stock has gained 15%.

In light of the stock dropping 3.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

Check out our latest analysis for Amadeus IT Group

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 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.

Amadeus IT Group became profitable within the last three years. 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're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Amadeus IT Group'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). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Amadeus IT Group, it has a TSR of 20% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Amadeus IT Group shareholders are up 17% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Amadeus IT Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Amadeus IT Group , and understanding them should be part of your investment process.

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 Spanish 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.