If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. To wit, the Hilltop Holdings Inc. (NYSE:HTH) share price is 26% higher than it was a year ago, much better than the market return of around 17% (not including dividends) in the same period. That's a solid performance by our standards! However, the stock hasn't done so well in the longer term, with the stock only up 12% in three years.

Since the stock has added US$72m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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.

During the last year Hilltop Holdings grew its earnings per share (EPS) by 53%. It's fair to say that the share price gain of 26% did not keep pace with the EPS growth. So it seems like the market has cooled on Hilltop Holdings, despite the growth. Interesting.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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. This free interactive report on Hilltop Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Hilltop Holdings' TSR for the last 1 year was 29%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Hilltop Holdings shareholders have received a total shareholder return of 29% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Hilltop Holdings better, we need to consider many other factors.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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

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.