Nemak S. A. B. de C. V (BMV:NEMAKA) pulls back 8.6% this week, but still delivers shareholders favorable 95% return over 1 year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Nemak, S. A. B. de C. V. (BMV:NEMAKA) share price is up 95% in the last 1 year, clearly besting the market return of around 10% (not including dividends). That's a solid performance by our standards! Unfortunately the longer term returns are not so good, with the stock falling 16% in the last three years.

Since the long term performance has been good but there's been a recent pullback of 8.6%, let's check if the fundamentals match the share price.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last twelve months Nemak S. A. B. de C. V went from profitable to unprofitable. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.

Revenue was pretty flat year on year, but maybe a closer look at the data can explain the market optimism.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that Nemak S. A. B. de C. V shareholders have received a total shareholder return of 95% over the last year. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Nemak S. A. B. de C. V better, we need to consider many other factors. Take risks, for example - Nemak S. A. B. de C. V has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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