Megacable Holdings S. A. B. de C. V's (BMV:MEGACPO) investors will be pleased with their favorable 37% 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 you can significantly boost your returns by picking above-average stocks. For example, the Megacable Holdings, S. A. B. de C. V. (BMV:MEGACPO) share price is up 28% in the last 1 year, clearly besting the market return of around 1.4% (not including dividends). That's a solid performance by our standards! However, the stock hasn't done so well in the longer term, with the stock only up 17% in three years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Over the last twelve months, Megacable Holdings S. A. B. de C. V actually shrank its EPS by 9.9%.

So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. It could be that the company is reaching maturity and dividend investors are buying for the yield, pushing the price up in the process. Though we must add that the revenue growth of 9.0% year on year would have helped paint a pretty picture.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Megacable Holdings S. A. B. de C. V is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Megacable Holdings S. A. B. de C. V, it has a TSR of 37% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Megacable Holdings S. A. B. de C. V shareholders have received a total shareholder return of 37% 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 2% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Megacable Holdings S. A. B. de C. V better, we need to consider many other factors. Even so, be aware that Megacable Holdings S. A. B. de C. V is showing 3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.