The 13% return delivered to Cyrela Brazil Realty Empreendimentos e Participações' (BVMF:CYRE3) shareholders actually lagged YoY earnings growth

Cyrela Brazil Realty S.A. Empreendimentos e Participações (BVMF:CYRE3) shareholders should be happy to see the share price up 17% in the last quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 13%, which falls well short of the return you could get by buying an index fund.

While the stock has risen 3.5% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Cyrela Brazil Realty Empreendimentos e Participações

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 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.

While the share price declined over five years, Cyrela Brazil Realty Empreendimentos e Participações actually managed to increase EPS by an average of 38% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics.

Revenue is actually up 13% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Cyrela Brazil Realty Empreendimentos e Participações the TSR over the last 5 years was 13%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Cyrela Brazil Realty Empreendimentos e Participações provided a TSR of 1.2% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 2% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Cyrela Brazil Realty Empreendimentos e Participações better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Cyrela Brazil Realty Empreendimentos e Participações you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.