Investing in MasTec (NYSE:MTZ) five years ago would have delivered you a 112% gain

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term MasTec, Inc. (NYSE:MTZ) shareholders would be well aware of this, since the stock is up 112% in five years. Also pleasing for shareholders was the 17% gain in the last three months.

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

Check out our latest analysis for MasTec

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

We know that MasTec has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. So we might find other metrics can better explain the share price movements.

In contrast revenue growth of 13% per year is probably viewed as evidence that MasTec is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

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

MasTec is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 24% in the last year, MasTec shareholders lost 5.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - MasTec has 2 warning signs (and 1 which can't be ignored) we think you should know about.

Of course MasTec may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com