ICICI Prudential Life Insurance's (NSE:ICICIPRULI) investors will be pleased with their decent 34% return over the last three years

Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the ICICI Prudential Life Insurance Company Limited (NSE:ICICIPRULI) share price is up 33% in the last three years, that falls short of the market return. Disappointingly, the share price is down 8.8% in the last year.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During three years of share price growth, ICICI Prudential Life Insurance achieved compound earnings per share growth of 15% per year. The average annual share price increase of 10% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. Of course, with a P/E ratio of 68.12, the market remains optimistic.

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

We know that ICICI Prudential Life Insurance has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

ICICI Prudential Life Insurance shareholders are down 8.7% for the year (even including dividends), but the market itself is up 0.1%. 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. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand ICICI Prudential Life Insurance better, we need to consider many other factors. For instance, we've identified 1 warning sign for ICICI Prudential Life Insurance that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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