Investors five-year losses continue as Ultrapar Participações (BVMF:UGPA3) dips a further 4.1% this week, earnings continue to decline

While it may not be enough for some shareholders, we think it is good to see the Ultrapar Participações S.A. (BVMF:UGPA3) share price up 10% in a single quarter. But that doesn't change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 63% in that time. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

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

View our latest analysis for Ultrapar Participações

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the five years over which the share price declined, Ultrapar Participações' earnings per share (EPS) dropped by 0.5% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 18% per year, over the period. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 9.60 further reflects this reticence.

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

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Ultrapar Participações, it has a TSR of -57% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Ultrapar Participações shareholders have received a total shareholder return of 11% over the last year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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 4 warning signs for Ultrapar Participações you should be aware of, and 2 of them are potentially serious.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.