Earnings growth of 0.5% over 5 years hasn't been enough to translate into positive returns for Yduqs Participações (BVMF:YDUQ3) shareholders

Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example the Yduqs Participações S.A. (BVMF:YDUQ3) share price dropped 57% over five years. That's not a lot of fun for true believers. The falls have accelerated recently, with the share price down 19% in the last three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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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 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, Yduqs Participações actually managed to increase EPS by an average of 2.7% 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). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.

The steady dividend doesn't really explain why the share price is down. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.

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

Yduqs Participações is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Yduqs Participações the TSR over the last 5 years was -53%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Yduqs Participações shareholders have received a total shareholder return of 15% over one year. And that does include the dividend. That certainly beats the loss of about 9% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Yduqs Participações better, we need to consider many other factors. Even so, be aware that Yduqs Participações is showing 3 warning signs in our investment analysis , and 1 of those is concerning...

We will like Yduqs Participações 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.