The total return for Primerica (NYSE:PRI) investors has risen faster than earnings growth over the last five years

Primerica, Inc. (NYSE:PRI) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 153% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now.

Although Primerica has shed US$366m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Primerica achieved compound earnings per share (EPS) growth of 20% per year. This EPS growth is remarkably close to the 20% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

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

We know that Primerica has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Primerica will grow revenue in the future.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Primerica the TSR over the last 5 years was 171%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Primerica shareholders have received a total shareholder return of 15% over one year. That's including the dividend. However, the TSR over five years, coming in at 22% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Primerica , and understanding them should be part of your investment process.

We will like Primerica better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.