Shareholders 14% loss in Reinsurance Group of America (NYSE: RGA) partly due to declining company profits over the past three years

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As an investor, it pays to strive to ensure that your overall portfolio beats the market average. But if you try your hand at stock picking, your risk of coming back less than the market. We regret to report that in the long term Reinsurance Group of America, Incorporated The shareholders of (NYSE: RGA) had this experience, with the stock price falling 20% ​​in three years, against a market return of around 61%.

While the past week has been more reassuring for shareholders, they are still in the red for the past three years, so let’s see if underlying activity was responsible for the decline.

Check out our latest review for Reinsurance Group of America

In his essay Graham-and-Doddsville super-investors Warren Buffett described how stock prices don’t always rationally reflect a company’s value. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

Reinsurance Group of America has seen its EPS decline at a compound rate of 23% per year, over the past three years. This drop in EPS is worse than the compound annual drop in the stock price of 7%. This suggests that the market remains optimistic about long-term earnings stability, despite past EPS declines.

You can see how EPS has changed over time in the image below (click on the graph to see the exact values).

NYSE: RGA Earnings Per Share Growth October 3, 2021

We know that Reinsurance Group of America has improved its results lately, but will it increase its revenue? You could check that out free report showing analysts’ earnings forecasts.

What about dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. We note that for Reinsurance Group of America, the TSR over the past 3 years was -14% which is better than the share price return mentioned above. The dividends paid by the company thus boosted the total shareholder return.

A different perspective

Reinsurance Group of America has provided a TSR of 19% over the past twelve months. But this yield is lower than the market. On the plus side, it’s still a payoff, and it’s actually better than the 3% average return over half a decade. This suggests that the business could improve over time. It is always interesting to follow the evolution of stock prices over the long term. But to better understand Reinsurance Group of America, there are many other factors that we need to consider. For example, we have identified 1 warning sign for Reinsurance Group of America of which you should be aware.

If you would rather consult with another company – one with potentially superior finances – then don’t miss this free list of companies that have proven they can increase their profits.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the US stock exchanges.

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

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