Investors in OUTsurance Group (JSE:OUT) have seen stellar returns of 187% over the past three 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, OUTsurance Group Limited (JSE:OUT) shareholders have seen the share price rise 31% over three years, well in excess of the market decline (4.8%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 21% , including dividends .

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for OUTsurance Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, OUTsurance Group achieved compound earnings per share growth of 25% per year. The average annual share price increase of 9% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of OUTsurance Group, it has a TSR of 187% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that OUTsurance Group has rewarded shareholders with a total shareholder return of 21% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 25% per year, is even more impressive. If you would like to research OUTsurance Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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 South African 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.