The 10% return this week takes Construtora Tenda's (BVMF:TEND3) shareholders three-year gains to 447%

We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Not every pick can be a winner, but when you pick the right stock, you can win big. One bright shining star stock has been Construtora Tenda S.A. (BVMF:TEND3), which is 431% higher than three years ago. It's also good to see the share price up 17% over the last quarter. But this could be related to the strong market, which is up 9.7% in the last three months.

Since the stock has added R$294m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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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 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.

Construtora Tenda became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

We know that Construtora Tenda has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Construtora Tenda the TSR over the last 3 years was 447%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Construtora Tenda has rewarded shareholders with a total shareholder return of 50% in the last twelve months. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 3% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Construtora Tenda better, we need to consider many other factors. Even so, be aware that Construtora Tenda is showing 1 warning sign in our investment analysis , you should know about...

Of course Construtora Tenda 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.