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It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. But if you're going to beat the market overall, you need to have individual stocks that outperform. One such company is Everest Re Group, Ltd. (NYSE:RE), which saw its share price increase 56% in the last year, slightly above the market return of around 56% (not including dividends). However, the stock hasn't done so well in the longer term, with the stock only up 13% in three years.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last year, Everest Re Group actually saw its earnings per share drop 48%.
So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
We think that the revenue growth of 17% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Everest Re Group in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Everest Re Group the TSR over the last year was 61%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Everest Re Group's TSR for the year was broadly in line with the market average, at 61%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 10%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Everest Re Group you should know about.
Everest Re Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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.
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