In order to justify the effort of picking individual stocks, it is worth striving to beat the returns of an index fund. But the main game is finding enough winners to more than make up for the losers, so we wouldn’t blame in the long run. Direct Line Insurance Group plc (LON:DLG) shareholders for doubting their decision to hold as the stock has fallen 15% in half a decade. In contrast, the stock price has jumped 8.0% over the past thirty days.

Looking back to the past week, investor sentiment for Direct Line Insurance Group is not positive, so let’s see if there is a mismatch between the fundamentals and the stock price.

Check out our latest analysis for Direct Line Insurance Group

In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. An imperfect but reasonable way to gauge changing sentiment around a company is to compare earnings per share (EPS) with the stock price.

In the five years that the share price has fallen, Direct Line Insurance Group’s earnings per share (EPS) have fallen by 0.7% each year. Readers should note that the stock price fell faster than EPS, at a rate of 3% per year, over the period. So it seems that the market was overconfident in the company in the past. The low P/E ratio of 10.99 further reflects this reluctance.

The image below shows how EPS has tracked over time (if you click on the image you can see more details).

LSE: DLG Earnings per share growth January 27, 2022

This free The Direct Line Insurance Group Earnings, Revenue and Cash Flow Interactive Report is a great place to start if you want to dig deeper into the stock.

What about dividends?

It is important to consider the total shareholder return, as well as the stock price return, for a given stock. While the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital raising or spin-offs. off updated. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. It turns out that Direct Line Insurance Group’s TSR for the past 5 years was 23%, which exceeds the share price return mentioned earlier. This is largely the result of its dividend payments!

A different perspective

Direct Line Insurance Group provided a TSR of 6.1% over the last twelve months. Unfortunately, this does not match the market return. On the bright side, it’s still a gain, and it’s actually better than the 4% average return over half a decade. Returns may improve with company fundamentals. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. For example, we found 1 warning sign for Direct Line Insurance Group which you should be aware of before investing here.

We’d like Direct Line Insurance Group better if we see big insider buying. In the meantime, watch this free list of growing companies with significant and recent insider buying.

Please note that the market returns quoted in this article reflect the market-weighted average returns of the shares currently trading on UK stock exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.