North European Oil Royalty Trust (NYSE:NRT) shareholders might understandably be very concerned that the share price has dropped 37% in the last quarter. But in three years the returns have been great. Indeed, the share price is up a very strong 161% in that time. To some, the recent share price pullback wouldn't be surprising after such a good run. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for North European Oil Royalty Trust

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, North European Oil Royalty Trust achieved compound earnings per share growth of 83% per year. The average annual share price increase of 38% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 2.55 also reflects the negative sentiment around the stock.

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

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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 spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for North European Oil Royalty Trust the TSR over the last 3 years was 268%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!