Construcciones y Auxiliar de Ferrocarriles (BME:CAF) delivers shareholders 26% return over 1 year, surging 5.3% in the last week alone

A diverse portfolio of stocks will always have winners and losers. Of course, the aim of the game is to pick stocks that do better than an index fund. Construcciones y Auxiliar de Ferrocarriles, S.A. (BME:CAF) has done well over the last year, with the stock price up 23% beating the market return of 20% (not including dividends). In contrast, the longer term returns are negative, since the share price is 15% lower than it was three years ago.

Since the stock has added €56m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Construcciones y Auxiliar de Ferrocarriles

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Construcciones y Auxiliar de Ferrocarriles was able to grow EPS by 11% in the last twelve months. The share price gain of 23% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

We know that Construcciones y Auxiliar de Ferrocarriles 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.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Construcciones y Auxiliar de Ferrocarriles the TSR over the last 1 year was 26%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Construcciones y Auxiliar de Ferrocarriles shareholders have received a total shareholder return of 26% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 0.7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Construcciones y Auxiliar de Ferrocarriles (1 shouldn't be ignored) that you should be aware of.

But note: Construcciones y Auxiliar de Ferrocarriles may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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