In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Webster Financial Corporation (NYSE:WBS), since the last five years saw the share price fall 12%. The last week also saw the share price slip down another 8.3%. But this could be related to the soft market, which is down about 4.4% in the same period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Webster Financial

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 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.

While the share price declined over five years, Webster Financial actually managed to increase EPS by an average of 1.6% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Given that EPS has increased, but the share price has fallen, it's fair to say that market sentiment around the stock has become more negative. Having said that, if the EPS gains continue we'd expect the share price to improve, longer term.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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. 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. As it happens, Webster Financial's TSR for the last 5 years was 6.3%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Webster Financial provided a TSR of 8.6% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 1.2% over half a decade It is possible that returns will improve along with the business fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Webster Financial you should know about.