Despite shrinking by US$503m in the past week, RenaissanceRe Holdings (NYSE:RNR) shareholders are still up 59% over 3 years

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, RenaissanceRe Holdings Ltd. (NYSE:RNR) shareholders have seen the share price rise 55% over three years, well in excess of the market return (17%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.1% in the last year, including dividends.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, RenaissanceRe Holdings moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how RenaissanceRe Holdings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at RenaissanceRe Holdings' financial health with this free report on its balance sheet .

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, RenaissanceRe Holdings' TSR for the last 3 years was 59%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that RenaissanceRe Holdings shareholders have received a total shareholder return of 8.1% over the last year. And that does include the dividend. However, that falls short of the 9% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand RenaissanceRe Holdings better, we need to consider many other factors. For instance, we've identified 1 warning sign for RenaissanceRe Holdings that you should be aware of.

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.

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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.