When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Selective Insurance Group, Inc. (NASDAQ:SIGI) share price is up 50% in the last five years, that's less than the market return. Unfortunately the share price is down 2.3% in the last year.

Although Selective Insurance Group has shed US$204m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Selective Insurance Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Selective Insurance Group's earnings per share are down 1.2% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

The modest 1.5% dividend yield is unlikely to be propping up the share price. On the other hand, Selective Insurance Group's revenue is growing nicely, at a compound rate of 11% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Selective Insurance Group in this interactive graph of future profit estimates.

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. We note that for Selective Insurance Group the TSR over the last 5 years was 61%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Selective Insurance Group shareholders are down 0.9% for the year (even including dividends), but the market itself is up 34%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 1 warning sign for Selective Insurance Group you should be aware of.

Selective Insurance Group is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.