Ferrovial (BME:FER) jumps 5.8% this week, though earnings growth is still tracking behind five-year shareholder returns

Passive investing in index funds can generate returns that roughly match the overall market. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the Ferrovial SE (BME:FER) share price is 93% higher than it was five years ago, which is more than the market average. We're also happy to report the stock is up a healthy 25% in the last year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Over half a decade, Ferrovial managed to grow its earnings per share at 48% a year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 9.45 also suggests market apprehension.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Ferrovial has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. In the case of Ferrovial, it has a TSR of 114% for the last 5 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

It's good to see that Ferrovial has rewarded shareholders with a total shareholder return of 27% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. 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 3 warning signs for Ferrovial you should be aware of, and 2 of them are significant.

Of course Ferrovial 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.