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Does RenaissanceRe Holdings' (NYSE:RNR) Share Price Gain of 48% Match Its Business Performance?

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·3 min read
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While RenaissanceRe Holdings Ltd. (NYSE:RNR) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 20% in the last quarter. While that's not great, the returns over five years have been decent. The share price is up 48%, which is better than the market return of 46%.

See our latest analysis for RenaissanceRe Holdings

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 five years of share price growth, RenaissanceRe Holdings achieved compound earnings per share (EPS) growth of 5.0% per year. This EPS growth is lower than the 8.2% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

NYSE:RNR Past and Future Earnings April 21st 2020
NYSE:RNR Past and Future Earnings April 21st 2020

We know that RenaissanceRe Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think RenaissanceRe Holdings will grow revenue in the future.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, RenaissanceRe Holdings's TSR for the last 5 years was 56%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that RenaissanceRe Holdings has rewarded shareholders with a total shareholder return of 2.0% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 9.3% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. To that end, you should be aware of the 2 warning signs we've spotted with RenaissanceRe Holdings .

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.