Investors more bullish on Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France (EPA:CAF) this week as stock ascends 3.1%, despite earnings trending downwards over past year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France (EPA:CAF) share price is up 25% in the last 1 year, clearly besting the market return of around 3.3% (not including dividends). That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 6.1% in the last three years.

Since it's been a strong week for Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France shareholders, let's have a look at trend of the longer term fundamentals.

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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.

Over the last twelve months, Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France actually shrank its EPS by 21%.

Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

Unfortunately Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France's fell 6.0% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized 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 Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France'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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France, it has a TSR of 30% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France shareholders have received a total shareholder return of 30% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 7%. 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. 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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Of course Caisse Régionale de Crédit Agricole Mutuel de Paris et d'Ile-de-France 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 French 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.