Investors in ICICI Lombard General Insurance (NSE:ICICIGI) have seen favorable returns of 61% over the past three years

Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But you can make better returns by buying undervalued shares. Notably, the ICICI Lombard General Insurance Company Limited (NSE:ICICIGI) share price has gained 57% in three years, which is better than the average market return. Zooming in, the stock is up just 2.7% in the last year.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

ICICI Lombard General Insurance was able to grow its EPS at 21% per year over three years, sending the share price higher. The average annual share price increase of 16% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of ICICI Lombard General Insurance'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of ICICI Lombard General Insurance, it has a TSR of 61% for the last 3 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 ICICI Lombard General Insurance has rewarded shareholders with a total shareholder return of 3.4% in the last twelve months. That's including the dividend. However, that falls short of the 6% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand ICICI Lombard General Insurance better, we need to consider many other factors. Even so, be aware that ICICI Lombard General Insurance is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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