Repsol's (BME:REP) investors will be pleased with their respectable 89% return over the last three years

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Repsol, S.A. (BME:REP) share price is up 66% in the last three years, clearly besting the market return of around 18% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 0.5% , including dividends .

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Repsol

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.

Repsol became profitable within the last three years. So we would expect a higher share price over the period.

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

We know that Repsol has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, Repsol's TSR for the last 3 years was 89%, 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

Repsol shareholders gained a total return of 0.5% during the year. But that was short of the market average. On the bright side, the longer term returns (running at about 4% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Repsol better, we need to consider many other factors. Take risks, for example - Repsol has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course Repsol 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 Spanish 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.