Investing in Gruma. de (BMV:GRUMAB) three years ago would have delivered you a 34% gain

Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Gruma, S.A.B. de C.V. (BMV:GRUMAB) share price is up 25% in the last three years, that falls short of the market return. In the last year the stock price gained, albeit only 4.7%.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Gruma. de

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Gruma. de was able to grow its EPS at 12% per year over three years, sending the share price higher. This EPS growth is higher than the 8% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.

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

We know that Gruma. de has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Gruma. de the TSR over the last 3 years was 34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Gruma. de shareholders are up 7.1% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 1.3% per year over five year. This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Gruma. de has 2 warning signs we think you should be aware of.

But note: Gruma. de 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 MX 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.