Telecom Plus' (LON:TEP) investors will be pleased with their notable 92% 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, Telecom Plus Plc (LON:TEP) shareholders have seen the share price rise 70% over three years, well in excess of the market decline (1.4%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 10%, including dividends.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Telecom Plus

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Telecom Plus was able to grow its EPS at 29% per year over three years, sending the share price higher. This EPS growth is higher than the 19% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Telecom Plus' key metrics by checking this interactive graph of Telecom Plus's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Telecom Plus' TSR for the last 3 years was 92%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Telecom Plus shareholders have received returns of 10% over twelve months (even including dividends), which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 12% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Telecom Plus a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Telecom Plus better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Telecom Plus you should be aware of.

But note: Telecom Plus may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.