By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Burford Capital Limited (LON:BUR), which is up 80%, over three years, soundly beating the market return of 6.8% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 17% , 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.

View our latest analysis for Burford Capital

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. 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.

Burford Capital was able to grow its EPS at 9.5% per year over three years, sending the share price higher. This EPS growth is lower than the 22% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth.

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

It's good to see that there was some significant insider buying in the last three months. That's 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 Burford Capital's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Burford Capital, it has a TSR of 86% for the last 3 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!

A Different Perspective

It's good to see that Burford Capital has rewarded shareholders with a total shareholder return of 17% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 7% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Burford Capital better, we need to consider many other factors. Take risks, for example - Burford Capital has 2 warning signs we think you should be aware of.