One way to deal with stock volatility is to ensure you have a properly diverse portfolio. But the goal is to pick stocks that do better than average. Embraer S.A. (BVMF:EMBR3) has done well over the last year, with the stock price up 73% beating the market return of 62% (not including dividends). Unfortunately the longer term returns are not so good, with the stock falling 32% in the last three years.
Embraer isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Embraer saw its revenue shrink by 67%. Despite the lack of revenue growth, the stock has returned a solid 73% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Embraer is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Embraer stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Embraer provided a TSR of 73% over the year. That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 6% over the last five years. While 'turnarounds seldom turn' there are green shoots for Embraer. 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. Case in point: We've spotted 2 warning signs for Embraer you should be aware of, and 1 of them doesn't sit too well with us.
But note: Embraer 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 BR 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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