Investors in Münchener Rückversicherungs-Gesellschaft in München (ETR:MUV2) have made a favorable return of 97% over the past five years

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (ETR:MUV2) shareholders have enjoyed a 58% share price rise over the last half decade, well in excess of the market decline of around 11% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 29% in the last year , 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.

View our latest analysis for Münchener Rückversicherungs-Gesellschaft in München

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Over half a decade, Münchener Rückversicherungs-Gesellschaft in München managed to grow its earnings per share at 56% a year. The EPS growth is more impressive than the yearly share price gain of 10% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Münchener Rückversicherungs-Gesellschaft in München has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Münchener Rückversicherungs-Gesellschaft in München 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Münchener Rückversicherungs-Gesellschaft in München, it has a TSR of 97% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Münchener Rückversicherungs-Gesellschaft in München has rewarded shareholders with a total shareholder return of 29% in the last twelve months. That's including the dividend. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Münchener Rückversicherungs-Gesellschaft in München has 1 warning sign we think you should be aware of.

We will like Münchener Rückversicherungs-Gesellschaft in München better if we see some big insider buys. While we wait, check out this free list of growing companies 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 DE 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.

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