If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Bendigo and Adelaide Bank Limited (ASX:BEN) share price is 36% higher than it was a year ago, much better than the market return of around 10% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Having said that, the longer term returns aren't so impressive, with stock gaining just 9.4% in three years.

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

View our latest analysis for Bendigo and Adelaide Bank

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.

Bendigo and Adelaide Bank was able to grow EPS by 27% in the last twelve months. This EPS growth is significantly lower than the 36% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

We know that Bendigo and Adelaide Bank has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Bendigo and Adelaide Bank will grow revenue in the future.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Bendigo and Adelaide Bank the TSR over the last 1 year was 46%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Bendigo and Adelaide Bank shareholders have received a total shareholder return of 46% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 5%. 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Bendigo and Adelaide Bank , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

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