The 3.5% return this week takes CNO Financial Group’s (NYSE:CNO) shareholders five-year gains to 86%

If you buy and hold a stock for many years, you’d hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But CNO Financial Group, Inc. (NYSE:CNO) has fallen short of that second goal, with a share price rise of 65% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 24% over the last year.

The past week has proven to be lucrative for CNO Financial Group investors, so let’s see if fundamentals drove the company’s five-year performance.

See our latest analysis for CNO Financial 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. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During the five years of share price growth, CNO Financial Group moved from a loss to profitability. That’s generally thought to be a genuine positive, so investors may expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it’s worth taking a look at the returns in the last three years, too. We can see that the CNO Financial Group share price is up 10% in the last three years. Meanwhile, EPS is up 6.2% per year. This EPS growth is higher than the 3% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.80.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of CNO Financial Group, it has a TSR of 86% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

CNO Financial Group’s TSR for the year was broadly in line with the market average, at 27%. Most would be happy with a gain, and it helps that the year’s return is actually better than the average return over five years, which was 13%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It’s always interesting to track share price performance over the longer term. But to understand CNO Financial Group better, we need to consider many other factors. Even so, be aware that CNO Financial Group is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious…

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.