Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Don’t believe it? Then look at the MGIC Investment Corporation (NYSE:MTG) share price. It’s 336% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. In the last week the share price is up 3.0%.

So let’s assess the underlying fundamentals over the last 5 years and see if they’ve moved in lock-step with shareholder returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Over half a decade, MGIC Investment managed to grow its earnings per share at 10% a year. This EPS growth is lower than the 34% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that’s hardly shocking given the track record of growth.

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

We know that MGIC Investment has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 MGIC Investment, it has a TSR of 391% for the last 5 years. 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!

We’re pleased to report that MGIC Investment shareholders have received a total shareholder return of 16% over one year. Of course, that includes the dividend. Having said that, the five-year TSR of 37% a year, is even better. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for MGIC Investment you should know about.