Earnings grew faster than the respectable 40% return delivered to Atresmedia Corporación de Medios de Comunicación (BME:A3M) shareholders over the last year

Simply Wall St · 10/26 06:48

We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Atresmedia Corporación de Medios de Comunicación, S.A. (BME:A3M), share price is up over the last year, but its gain of 29% trails the market return. Longer term, the stock is up 26% in three years.

In light of the stock dropping 4.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

View our latest analysis for Atresmedia Corporación de Medios de Comunicación

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

Atresmedia Corporación de Medios de Comunicación was able to grow EPS by 56% in the last twelve months. This EPS growth is significantly higher than the 29% increase in the share price. So it seems like the market has cooled on Atresmedia Corporación de Medios de Comunicación, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 5.54.

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

earnings-per-share-growth
BME:A3M Earnings Per Share Growth October 26th 2024

It is of course excellent to see how Atresmedia Corporación de Medios de Comunicación has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Atresmedia Corporación de Medios de Comunicación the TSR over the last 1 year was 40%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Atresmedia Corporación de Medios de Comunicación shareholders have received a total shareholder return of 40% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with 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. Even so, be aware that Atresmedia Corporación de Medios de Comunicación is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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