Cielo's (BVMF:CIEL3) earnings have declined over five years, contributing to shareholders 38% loss

It is a pleasure to report that the Cielo S.A. (BVMF:CIEL3) is up 39% in the last quarter. But if you look at the last five years the returns have not been good. After all, the share price is down 52% in that time, significantly under-performing the market.

The recent uptick of 3.8% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Cielo

There is no denying that markets are sometimes efficient, but prices do not always reflect 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, Cielo moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. The revenue decline of around 1.5% would not have helped the stock price. So the the weak dividend and revenue data could well help explain the soft share price.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Cielo has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Cielo's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Cielo's TSR for the last 5 years was -38%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Cielo shareholders gained a total return of 9.1% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 7% per year, over five years. So this might be a sign the business has turned its fortunes around. 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. Case in point: We've spotted 2 warning signs for Cielo you should be aware of, and 1 of them is a bit unpleasant.

Of course Cielo 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.