Shareholders Of Arezzo Indústria e Comércio (BVMF:ARZZ3) Must Be Happy With Their 273% Total Return

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Arezzo Indústria e Comércio S.A. (BVMF:ARZZ3) which saw its share price drive 221% higher over five years. Also pleasing for shareholders was the 25% gain in the last three months. But this could be related to the strong market, which is up 19% in the last three months.

Check out our latest analysis for Arezzo Indústria e Comércio

While Arezzo Indústria e Comércio made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Arezzo Indústria e Comércio saw its revenue grow at 7.6% per year. That's a pretty good long term growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 26% per year over five years. Given that the business has made good progress on the top line, it would be worth taking a look at the growth trend. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Arezzo Indústria e Comércio is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Arezzo Indústria e Comércio stock, you should check out this free report showing analyst consensus estimates for future profits.

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 Arezzo Indústria e Comércio, it has a TSR of 273% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Arezzo Indústria e Comércio shareholders gained a total return of 3.4% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 30% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Arezzo Indústria e Comércio (of which 1 makes us a bit uncomfortable!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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