By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Bilfinger SE (ETR:GBF) share price is up 68% in the last three years, clearly besting the market decline of around 13% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 18%.

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 Bilfinger

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During three years of share price growth, Bilfinger achieved compound earnings per share growth of 22% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 19% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Au contraire, the share price change has arguably mimicked the EPS growth.

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

We know that Bilfinger has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bilfinger the TSR over the last 3 years was 106%, 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 Bilfinger shareholders have received a total shareholder return of 18% over one year. Of course, that includes the dividend. That's better than the annualised return of 17% over half a decade, implying that the company is doing better recently. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Bilfinger , and understanding them should be part of your investment process.