Investing in Prio (BVMF:PRIO3) five years ago would have delivered you a 339% gain

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Prio S.A. (BVMF:PRIO3) share price is up a whopping 338% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. Then again, the 9.7% share price decline hasn't been so fun for shareholders. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Over half a decade, Prio managed to grow its earnings per share at 75% a year. This EPS growth is higher than the 34% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 2.96 also suggests market apprehension.

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

We know that Prio has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Prio's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 3.2% in the last year, Prio shareholders lost 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 34% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 3 warning signs for Prio that you should be aware of.

But note: Prio may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.