The 6.4% return this week takes CNO Financial Group's (NYSE:CNO) shareholders three-year gains to 38%

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the CNO Financial Group, Inc. (NYSE:CNO) share price is up 28% in the last three years, clearly besting the market return of around 22% (not including dividends).

The past week has proven to be lucrative for CNO Financial Group investors, so let's see if fundamentals drove the company's three-year performance.

View our latest analysis for CNO Financial Group

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

CNO Financial Group became profitable within the last three years. So we would expect a higher share price over the period.

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

earnings-per-share-growth

It is of course excellent to see how CNO Financial Group has grown profits over the years, but the future is more important for shareholders. This free interactive report on CNO Financial Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, CNO Financial Group's TSR for the last 3 years was 38%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Although it hurts that CNO Financial Group returned a loss of 20% in the last twelve months, the broader market was actually worse, returning a loss of 23%. Given the total loss of 1.7% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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 - CNO Financial Group has 2 warning signs we think you should be aware of.

But note: CNO Financial Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here