By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Western Alliance Bancorporation (NYSE:WAL), which is up 64%, over three years, soundly beating the market return of 30% (not including dividends).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Western Alliance Bancorporation

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 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.

Western Alliance Bancorporation was able to grow its EPS at 26% per year over three years, sending the share price higher. This EPS growth is higher than the 18% average annual increase in the share price. 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 8.49.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Western Alliance Bancorporation's earnings, revenue and cash flow.

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 Western Alliance Bancorporation, it has a TSR of 73% for the last 3 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

While the broader market lost about 16% in the twelve months, Western Alliance Bancorporation shareholders did even worse, losing 19% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 12%, 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 Western Alliance Bancorporation better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Western Alliance Bancorporation you should know about.

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 US 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.