BPER Banca (BIT:BPE) shareholders have earned a 29% CAGR over the last three years

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the BPER Banca SpA (BIT:BPE) share price is up 92% in the last three years, clearly besting the market decline of around 6.3% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 57% , including dividends .

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for BPER Banca

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

BPER Banca was able to grow its EPS at 92% per year over three years, sending the share price higher. The average annual share price increase of 24% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.19.

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

We know that BPER Banca has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for BPER Banca the TSR over the last 3 years was 113%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that BPER Banca shareholders have received a total shareholder return of 57% over the last year. And that does include the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with 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. Even so, be aware that BPER Banca is showing 4 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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