Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Jet2 plc (LON:JET2) share price is up 64% in the last 5 years, clearly besting the market return of around 0.7% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 9.3% , including dividends .

While the stock has fallen 3.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Jet2

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...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, Jet2 became profitable. That would generally be considered a positive, so we'd expect the share price to be up.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. 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 Jet2'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). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Jet2, it has a TSR of 68% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Jet2 has rewarded shareholders with a total shareholder return of 9.3% in the last twelve months. And that does include the dividend. However, that falls short of the 11% TSR per annum it has made for shareholders, each year, over five years. 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. To that end, you should learn about the 2 warning signs we've spotted with Jet2 (including 1 which doesn't sit too well with us) .