Bank of Ireland Group (ISE:BIRG) stock performs better than its underlying earnings growth over last five years

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Bank of Ireland Group plc (ISE:BIRG) which saw its share price drive 187% higher over five years. And in the last week the share price has popped 6.6%. But this could be related to the buoyant market which is up about 3.3% in a week.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Bank of Ireland Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Bank of Ireland Group achieved compound earnings per share (EPS) growth of 29% per year. This EPS growth is higher than the 23% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 6.85 also suggests market apprehension.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Bank of Ireland 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Bank of Ireland Group's TSR for the last 5 years was 214%, 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

It's good to see that Bank of Ireland Group has rewarded shareholders with a total shareholder return of 24% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 26% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Bank of Ireland Group better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Bank of Ireland Group you should be aware of, and 1 of them is significant.

We will like Bank of Ireland Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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