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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Mercal Inmuebles Socimi, S.A. (BME:YMEI) shareholders, since the share price is down 15% in the last three years, falling well short of the market return of around 21%. Unhappily, the share price slid 2.5% in the last week.

Check out our latest analysis for Mercal Inmuebles Socimi

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the three years that the share price fell, Mercal Inmuebles Socimi's earnings per share (EPS) dropped by 0.4% each year. This reduction in EPS is slower than the 5.3% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

This free interactive report on Mercal Inmuebles Socimi's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Mercal Inmuebles Socimi, it has a TSR of -2.2% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Mercal Inmuebles Socimi shareholders may not have made money over the last year, but their total loss of 0.5% ( including dividends) isn't as bad as the market loss of around 0.5%. Furthermore, the stock lost shareholders 0.7% per year over three years, so the one-year return was better in a relative sense. It is of course not much comfort to know that the losses have slowed. Shareholders will be hoping for a proper turnaround, no doubt. Keeping this in mind, a solid next step might be to take a look at Mercal Inmuebles Socimi's dividend track record. This free interactive graph is a great place to start.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.