Banco BTG Pactual (BVMF:BPAC11) sheds 3.7% this week, as yearly returns fall more in line with earnings growth

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Banco BTG Pactual S.A. (BVMF:BPAC11) which saw its share price drive 147% higher over five years. It's also good to see the share price up 13% over the last quarter.

Although Banco BTG Pactual has shed R$8.5b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Banco BTG Pactual achieved compound earnings per share (EPS) growth of 26% per year. This EPS growth is higher than the 20% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

We know that Banco BTG Pactual has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Banco BTG Pactual's TSR for the last 5 years was 173%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Banco BTG Pactual shareholders have received a total shareholder return of 46% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 22% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Banco BTG Pactual you might want to consider these 3 valuation metrics.

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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.