Those who invested in American International Group (NYSE:AIG) three years ago are up 79%

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the American International Group, Inc. (NYSE:AIG) share price is up 66% in the last three years, clearly besting the market return of around 11% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.5% in the last year , including dividends .

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for American International Group

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

American International Group became profitable within the last three years. So we would expect a higher share price over the period.

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

It is of course excellent to see how American International Group has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for American International Group the TSR over the last 3 years was 79%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

American International Group provided a TSR of 8.5% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 11% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand American International Group better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for American International Group you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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