Aedas Homes' (BME:AEDAS) one-year earnings growth trails the 99% YoY shareholder returns

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the Aedas Homes, S.A. (BME:AEDAS) share price is 71% higher than it was a year ago, much better than the market return of around 28% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! The longer term returns have not been as good, with the stock price only 12% higher than it was three years ago.

Since the stock has added €52m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Aedas Homes

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 the last year Aedas Homes grew its earnings per share (EPS) by 4.5%. The share price gain of 71% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

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

This free interactive report on Aedas Homes' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Aedas Homes the TSR over the last 1 year was 99%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Aedas Homes has rewarded shareholders with a total shareholder return of 99% in the last twelve months. And that does include the dividend. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Aedas Homes (of which 1 can't be ignored!) you should know about.

But note: Aedas Homes 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.

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

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.