The total return for Plano & Plano Desenvolvimento Imobiliário (BVMF:PLPL3) investors has risen faster than earnings growth over the last three years

Plano & Plano Desenvolvimento Imobiliário S.A. (BVMF:PLPL3) shareholders might be concerned after seeing the share price drop 10% in the last week. But that doesn't change the fact that the returns over the last three years have been very strong. In fact, the share price is up a full 276% compared to three years ago. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Plano & Plano Desenvolvimento Imobiliário was able to grow its EPS at 48% per year over three years, sending the share price higher. We note that the 56% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.

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

It is of course excellent to see how Plano & Plano Desenvolvimento Imobiliário has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Plano & Plano Desenvolvimento Imobiliário's TSR for the last 3 years was 346%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Plano & Plano Desenvolvimento Imobiliário has rewarded shareholders with a total shareholder return of 34% in the last twelve months. And that does include the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Plano & Plano Desenvolvimento Imobiliário has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course Plano & Plano Desenvolvimento Imobiliário may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.