Investors one-year losses continue as Arezzo Indústria e Comércio (BVMF:ARZZ3) dips a further 4.1% this week, earnings continue to decline

It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Arezzo Indústria e Comércio S.A. (BVMF:ARZZ3) have tasted that bitter downside in the last year, as the share price dropped 29%. That falls noticeably short of the market return of around 22%. At least the damage isn't so bad if you look at the last three years, since the stock is down 19% in that time.

With the stock having lost 4.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Arezzo Indústria e Comércio

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Arezzo Indústria e Comércio had to report a 12% decline in EPS over the last year. This reduction in EPS is not as bad as the 29% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.

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

We know that Arezzo Indústria e Comércio has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. As it happens, Arezzo Indústria e Comércio's TSR for the last 1 year was -27%, 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

While the broader market gained around 22% in the last year, Arezzo Indústria e Comércio shareholders lost 27% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Arezzo Indústria e Comércio , and understanding them should be part of your investment process.

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 Brazilian 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.