Webuild (BIT:WBD) shareholders have earned a 48% return over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Webuild S.p.A. (BIT:WBD) share price is up 43% in the last 1 year, clearly besting the market return of around 15% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! However, the stock hasn't done so well in the longer term, with the stock only up 6.9% in three years.

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

See our latest analysis for Webuild

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During the last year Webuild saw its earnings per share (EPS) increase strongly. We don't think the exact number is a good guide to the sustainable growth rate, but we do think this sort of increase is impressive. So we'd expect to see the share price higher. Strong growth like this can be evidence of a fundamental inflection point in the business, making it a good time to investigate the stock more closely.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Webuild has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Webuild's TSR for the last 1 year was 48%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Webuild shareholders have received a total shareholder return of 48% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Webuild , and understanding them should be part of your investment process.

Of course Webuild 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 Italian 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.