Cementos Molins' (BDM:CMO) 15% CAGR outpaced the company's earnings growth over the same three-year period

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, Cementos Molins, S.A. (BDM:CMO) shareholders have seen the share price rise 41% over three years, well in excess of the market return (25%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 19% , including dividends .

Since the stock has added €57m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Cementos Molins

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Cementos Molins achieved compound earnings per share growth of 17% per year. The average annual share price increase of 12% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.54.

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

We know that Cementos Molins has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Cementos Molins 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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Cementos Molins, it has a TSR of 53% 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

Cementos Molins provided a TSR of 19% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 7% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Cementos Molins better, we need to consider many other factors. Even so, be aware that Cementos Molins is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.