When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Stewart Information Services Corporation (NYSE:STC) has fallen short of that second goal, with a share price rise of 69% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 53% over the last year.

The past week has proven to be lucrative for Stewart Information Services investors, so let's see if fundamentals drove the company's five-year performance.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Stewart Information Services' earnings per share are down 4.3% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

In contrast revenue growth of 7.4% per year is probably viewed as evidence that Stewart Information Services is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. As it happens, Stewart Information Services' TSR for the last 5 years was 98%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Stewart Information Services shareholders have received a total shareholder return of 58% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that Stewart Information Services is showing 2 warning signs in our investment analysis , you should know about...

For those who like to find winning investments this free list of undervalued 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 American 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.

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