We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the The Hanover Insurance Group, Inc. (NYSE:THG) share price is up 30% in the last year, that falls short of the market return. Looking back further, the share price is 28% higher than it was three years ago.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 the last year Hanover Insurance Group grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

However the year on year revenue growth of 4.0% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

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

We know that Hanover Insurance Group has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Hanover Insurance 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hanover Insurance Group the TSR over the last 1 year was 34%, 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

Hanover Insurance Group shareholders have received returns of 34% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 7% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. Before spending more time on Hanover Insurance Group it might be wise to click here to see if insiders have been buying or selling shares.

Of course Hanover Insurance Group 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 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.