Fresnillo's (LON:FRES) investors will be pleased with their favorable 96% return over the last year

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the Fresnillo plc (LON:FRES) share price is up 85% in the last 1 year, clearly besting the market return of around 2.2% (not including dividends). So that should have shareholders smiling. Looking back further, the stock price is 32% higher than it was three years ago.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Our free stock report includes 2 warning signs investors should be aware of before investing in Fresnillo. Read for free now.

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 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, Fresnillo actually saw its earnings per share drop 40%.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We think that the revenue growth of 29% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Fresnillo stock, you should check out this free report showing analyst profit forecasts.

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. In the case of Fresnillo, it has a TSR of 96% for the last 1 year. 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

We're pleased to report that Fresnillo shareholders have received a total shareholder return of 96% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Fresnillo better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Fresnillo , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.