Azzas 2154's (BVMF:AZZA3) earnings have declined over three years, contributing to shareholders 54% loss

If you love investing in stocks you're bound to buy some losers. Long term Azzas 2154 S.A. (BVMF:AZZA3) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 58% decline in the share price in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 45% lower in that time. The falls have accelerated recently, with the share price down 22% in the last three months.

On a more encouraging note the company has added R$345m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for Azzas 2154

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Azzas 2154 saw its EPS decline at a compound rate of 7.4% per year, over the last three years. The share price decline of 25% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Azzas 2154 has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Azzas 2154 will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Azzas 2154's TSR for the last 3 years was -54%, 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

We regret to report that Azzas 2154 shareholders are down 44% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For instance, we've identified 2 warning signs for Azzas 2154 (1 is potentially serious) that you should be aware of.

We will like Azzas 2154 better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.