Yahoo Finance Sun Life Financial's (TSE:SLF) investors will be pleased with their notable 45% return over the last three years
Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Sun Life Financial Inc. (TSE:SLF) share price. It's up 29% over three years, but that is below the market return. Having said that, the 21% increase over the past year is good to see.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Sun Life Financial
There is no denying that markets are sometimes efficient, but prices do not always reflect 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 three years of share price growth, Sun Life Financial achieved compound earnings per share growth of 10% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 9% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Sun Life Financial's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sun Life Financial the TSR over the last 3 years was 45%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Sun Life Financial shareholders have received a total shareholder return of 26% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Sun Life Financial is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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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