These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Inchcape plc (LON:INCH) share price is 17% higher than it was a year ago, much better than the market return of around 12% (not including dividends) in the same period. So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 3.8% in three years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Inchcape

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 Inchcape grew its earnings per share (EPS) by 34%. It's fair to say that the share price gain of 17% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Inchcape as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 11.24.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Inchcape's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Inchcape's TSR for the last 1 year was 23%, 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 Inchcape shareholders have received a total shareholder return of 23% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 6%. 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. Take risks, for example - Inchcape has 2 warning signs we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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