ICICI Lombard General Insurance's (NSE:ICICIGI) investors will be pleased with their favorable 59% return over the last three years

Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But you can make superior returns by picking better-than average stocks. For example, the ICICI Lombard General Insurance Company Limited (NSE:ICICIGI) share price is up 56% in the last three years, slightly above the market return. The bad news is that the share price seems to lack positive momentum recently, since it has dropped 10% in the last year.

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

During three years of share price growth, ICICI Lombard General Insurance achieved compound earnings per share growth of 23% per year. This EPS growth is higher than the 16% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on ICICI Lombard General Insurance's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ICICI Lombard General Insurance's TSR for the last 3 years was 59%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 4.6% in the twelve months, ICICI Lombard General Insurance shareholders did even worse, losing 9.6% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand ICICI Lombard General Insurance better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for ICICI Lombard General Insurance you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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