Megacable Holdings S. A. B. de C. V (BMV:MEGACPO) sheds Mex$1.6b, company earnings and investor returns have been trending downwards for past five years

Megacable Holdings, S. A. B. de C. V. (BMV:MEGACPO) shareholders should be happy to see the share price up 23% in the last month. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 55%, which falls well short of the return you could get by buying an index fund.

With the stock having lost 4.2% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Megacable Holdings S. A. B. de C. V

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 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 five years over which the share price declined, Megacable Holdings S. A. B. de C. V's earnings per share (EPS) dropped by 8.3% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 15% per year, over the period. This implies that the market was previously too optimistic about the stock.

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

This free interactive report on Megacable Holdings S. A. B. de C. V's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Megacable Holdings S. A. B. de C. V's TSR for the last 5 years was -45%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Megacable Holdings S. A. B. de C. V shareholders are down 9.5% for the year (even including dividends), but the market itself is up 8.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 8% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Megacable Holdings S. A. B. de C. V (of which 1 can't be ignored!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.