Grupo Financiero Banorte. de's (BMV:GFNORTEO) five-year total shareholder returns outpace the underlying earnings growth

By
Simply Wall St
Published
February 19, 2022
BMV:GFNORTE O
Source: Shutterstock

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Grupo Financiero Banorte, S.A.B. de C.V. (BMV:GFNORTEO) share price is up 31% in the last 5 years, clearly besting the market return of around 17% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 29% in the last year , including dividends .

Since the long term performance has been good but there's been a recent pullback of 6.4%, let's check if the fundamentals match the share price.

Check out our latest analysis for Grupo Financiero Banorte. de

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, Grupo Financiero Banorte. de managed to grow its earnings per share at 12% a year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 10.72 also suggests market apprehension.

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

earnings-per-share-growth
BMV:GFNORTE O Earnings Per Share Growth February 19th 2022

Dive deeper into Grupo Financiero Banorte. de's key metrics by checking this interactive graph of Grupo Financiero Banorte. de's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Grupo Financiero Banorte. de the TSR over the last 5 years was 57%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Grupo Financiero Banorte. de has rewarded shareholders with a total shareholder return of 29% in the last twelve months. And that does include 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. It's always interesting to track share price performance over the longer term. But to understand Grupo Financiero Banorte. de better, we need to consider many other factors. For example, we've discovered 1 warning sign for Grupo Financiero Banorte. de that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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