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Did RenaissanceRe Holdings' (NYSE:RNR) Share Price Deserve to Gain 30%?

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It hasn't been the best quarter for RenaissanceRe Holdings Ltd. (NYSE:RNR) shareholders, since the share price has fallen 14% in that time. But at least the stock is up over the last five years. Unfortunately its return of 30% is below the market return of 122%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 18% drop, in the last year.

See our latest analysis for RenaissanceRe Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 the last half decade, RenaissanceRe Holdings became profitable. That would generally be considered a positive, so we'd expect the share price to be up.

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

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

It is of course excellent to see how RenaissanceRe Holdings has grown profits over the years, but the future is more important for shareholders. This free interactive report on RenaissanceRe Holdings' balance sheet strength 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, RenaissanceRe Holdings' TSR for the last 5 years was 36%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 39% in the last year, RenaissanceRe Holdings shareholders lost 17% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Is RenaissanceRe Holdings cheap compared to other companies? These 3 valuation measures might help you decide.

Of course RenaissanceRe Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

This article by Simply Wall St is general in nature. 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.