Update: RSA Insurance Group (LON:RSA) Stock Gained 24% In The Last Five Years

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term RSA Insurance Group plc (LON:RSA) shareholders have enjoyed a 24% share price rise over the last half decade, well in excess of the market return of around 6.9% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 10% , including dividends .

View our latest analysis for RSA Insurance Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years of share price growth, RSA Insurance Group moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. In fact, the RSA Insurance Group stock price is 2.6% lower in the last three years. Meanwhile, EPS is up 27% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -0.9% per year.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into RSA Insurance Group's key metrics by checking this interactive graph of RSA Insurance 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of RSA Insurance Group, it has a TSR of 43% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

RSA Insurance Group shareholders are up 10% for the year (even including dividends) . Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 7.4% per year over five year. This suggests the company might be improving over 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. Case in point: We've spotted 1 warning sign for RSA Insurance Group you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.