Did Business Growth Power Sofina Société Anonyme's (EBR:SOF) Share Price Gain of 182%?

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 when you pick a company that is really flourishing, you can make more than 100%. For example, the Sofina Société Anonyme (EBR:SOF) share price has soared 182% in the last half decade. Most would be very happy with that. In the last week shares have slid back 2.0%.

View our latest analysis for Sofina Société Anonyme

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 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 five years of share price growth, Sofina Société Anonyme achieved compound earnings per share (EPS) growth of 4.0% per year. This EPS growth is slower than the share price growth of 23% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Sofina Société Anonyme'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. As it happens, Sofina Société Anonyme's TSR for the last 5 years was 200%, 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

It's nice to see that Sofina Société Anonyme shareholders have received a total shareholder return of 40% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 25% 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 Sofina Société Anonyme better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Sofina Société Anonyme .

But note: Sofina Société Anonyme may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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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. 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.
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