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Update: Donegal Group (NASDAQ:DGIC.A) Stock Gained 11% In The Last Year

We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. For example, the Donegal Group Inc. (NASDAQ:DGIC.A), share price is up over the last year, but its gain of 11% trails the market return. The longer term returns are positive, with the share price up 9.9% in three years.

See our latest analysis for Donegal Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Donegal Group was able to grow EPS by 107% in the last twelve months. It's fair to say that the share price gain of 11% did not keep pace with the EPS growth. So it seems like the market has cooled on Donegal Group, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 7.69.

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

earnings-per-share-growth
earnings-per-share-growth

We know that Donegal Group has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Donegal Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Donegal Group, it has a TSR of 16% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Donegal Group provided a TSR of 16% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Donegal Group better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Donegal Group (including 1 which doesn't sit too well with us) .

But note: Donegal Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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