Investors who have held Banca Sistema (BIT:BST) over the last three years have watched its earnings decline along with their investment

Banca Sistema S.p.A. (BIT:BST) shareholders should be happy to see the share price up 28% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 23% in the last three years, falling well short of the market return.

While the last three years has been tough for Banca Sistema shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Banca Sistema

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Banca Sistema saw its EPS decline at a compound rate of 14% per year, over the last three years. In comparison the 8% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Banca Sistema's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Banca Sistema's TSR for the last 3 years was -9.6%, 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

Banca Sistema provided a TSR of 20% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Banca Sistema you should know about.

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.