Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Swiss Life Holding share price has climbed 45% in five years, easily topping the market return of 16% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 19% , including dividends .

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Swiss Life Holding

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.

Over half a decade, Swiss Life Holding managed to grow its earnings per share at 9.1% a year. So the EPS growth rate is rather close to the annualized share price gain of 8% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

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

Dive deeper into Swiss Life Holding's key metrics by checking this interactive graph of Swiss Life Holding's earnings, revenue and cash flow.

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 Swiss Life Holding the TSR over the last 5 years was 84%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Swiss Life Holding has rewarded shareholders with a total shareholder return of 19% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Swiss Life Holding is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...