Investors in London Stock Exchange Group (LON:LSEG) have made a notable return of 97% over the past five years

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term London Stock Exchange Group plc (LON:LSEG) shareholders have enjoyed a 87% share price rise over the last half decade, well in excess of the market decline of around 1.4% (not including dividends).

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for London Stock Exchange 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.

London Stock Exchange Group's earnings per share are down 1.4% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

The modest 1.4% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 35% per year is probably viewed as evidence that London Stock Exchange Group is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

London Stock Exchange Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling London Stock Exchange Group stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, London Stock Exchange Group's TSR for the last 5 years was 97%, 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

While the broader market lost about 0.7% in the twelve months, London Stock Exchange Group shareholders did even worse, losing 1.4% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on London Stock Exchange Group it might be wise to click here to see if insiders have been buying or selling shares.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.