Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Essent Group Ltd. (NYSE:ESNT) share price. It's up 29% over three years, but that is below the market return. At least the stock price is up over the last year, albeit only by 3.5%.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Essent Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Essent Group was able to grow its EPS at 7.5% per year over three years, sending the share price higher. We note that the 9% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Essent Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Essent Group the TSR over the last 3 years was 37%, 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

Essent Group provided a TSR of 5.5% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 5% over half a decade It is possible that returns will improve along with the business fundamentals. Before spending more time on Essent Group it might be wise to click here to see if insiders have been buying or selling shares.

Of course Essent 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.