Those who invested in Fomento de Construcciones y Contratas (BME:FCC) a year ago are up 45%

Fomento de Construcciones y Contratas, S.A. (BME:FCC) shareholders might be concerned after seeing the share price drop 19% in the last quarter. But that doesn't change the reality that over twelve months the stock has done really well. To wit, it had solidly beat the market, up 40%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Fomento de Construcciones y Contratas

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year Fomento de Construcciones y Contratas grew its earnings per share (EPS) by 80%. It's fair to say that the share price gain of 40% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Fomento de Construcciones y Contratas as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.00.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Fomento de Construcciones y Contratas has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Fomento de Construcciones y Contratas will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Fomento de Construcciones y Contratas the TSR over the last 1 year was 45%, 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 Fomento de Construcciones y Contratas shareholders have received a total shareholder return of 45% over the last year. And that does include the dividend. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 2 warning signs for Fomento de Construcciones y Contratas you should be aware of, and 1 of them makes us a bit uncomfortable.

Of course Fomento de Construcciones y Contratas may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.