Those who invested in SCOR (EPA:SCR) three years ago are up 74%

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, the SCOR SE (EPA:SCR) share price is up 44% in the last three years, clearly besting the market return of around 17% (not 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.

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years of share price growth, SCOR actually saw its earnings per share (EPS) drop 71% per year.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it's worth considering other metrics as well.

We doubt the dividend payments explain the share price rise, since we don't see any improvement in that regard. The revenue decline of 2.8% would scarcely encourage buyers. Ultimately, we can't really explain why the share price is up, but the answer could lie in a more detailed look at the data.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at SCOR's financial health with this free report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for SCOR the TSR over the last 3 years was 74%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that SCOR has rewarded shareholders with a total shareholder return of 53% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand SCOR better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with SCOR , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.