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Suncorp Group (ASX:SUN) shareholders have earned a 50% return over the last year

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Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Suncorp Group Limited (ASX:SUN) share price is 41% higher than it was a year ago, much better than the market return of around 18% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 14% in the last three years.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Suncorp Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

During the last year Suncorp Group grew its earnings per share (EPS) by 64%. It's fair to say that the share price gain of 41% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Suncorp Group as it was before. This could be an opportunity.

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

earnings-per-share-growth
earnings-per-share-growth

We know that Suncorp Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Suncorp Group the TSR over the last 1 year was 50%, 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

It's good to see that Suncorp Group has rewarded shareholders with a total shareholder return of 50% in the last twelve months. That's including the dividend. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Suncorp Group has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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.

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

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