Earnings are growing at Ultrapar Participações (BVMF:UGPA3) but shareholders still don't like its prospects

The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Ultrapar Participações S.A. (BVMF:UGPA3) shareholders over the last year, as the share price declined 40%. That falls noticeably short of the market decline of around 9.0%. On the other hand, the stock is actually up 9.0% over three years. The falls have accelerated recently, with the share price down 25% in the last three months. But this could be related to the weak market, which is down 10% in the same period.

If the past week is anything to go by, investor sentiment for Ultrapar Participações isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Ultrapar Participações

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Even though the Ultrapar Participações share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

Ultrapar Participações' dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.

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

Ultrapar Participações is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Ultrapar Participações will earn in the future (free analyst consensus estimates)

A Different Perspective

While the broader market lost about 9.0% in the twelve months, Ultrapar Participações shareholders did even worse, losing 39% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Ultrapar Participações has 3 warning signs we think you should be aware of.

But note: Ultrapar Participações 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.