T. Rowe Price Group (NASDAQ:TROW) shareholders have endured a 23% loss from investing in the stock three years ago

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term T. Rowe Price Group, Inc. (NASDAQ:TROW) shareholders, since the share price is down 32% in the last three years, falling well short of the market return of around 32%.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

See our latest analysis for T. Rowe Price Group

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 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.

During the three years that the share price fell, T. Rowe Price Group's earnings per share (EPS) dropped by 12% each year. The 12% average annual share price decline is remarkably close to the EPS decline. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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 T. Rowe Price Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, T. Rowe Price Group's TSR for the last 3 years was -23%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

T. Rowe Price Group shareholders gained a total return of 12% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 0.8% over half a decade This suggests the company might be improving over time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.