Those who invested in Sacyr (BME:SCYR) three years ago are up 82%

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. For example, the Sacyr, S.A. (BME:SCYR) share price is up 66% in the last three years, clearly besting the market return of around 25% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 11%, 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.

Check out our latest analysis for Sacyr

Given that Sacyr didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Sacyr's revenue trended up 4.2% each year over three years. That's not a very high growth rate considering it doesn't make profits. In that time the share price is up 18% per year, which is not unreasonable given the revenue growth. Ultimately, the important thing is whether the company is trending to profitability. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Sacyr's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Sacyr's TSR for the last 3 years was 82%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Sacyr shareholders are up 11% for the year (even including dividends). But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 10% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Sacyr better, we need to consider many other factors. Even so, be aware that Sacyr is showing 2 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com