BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' (BVMF:AGRO3) investors will be pleased with their stellar 148% return over the last five years

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (BVMF:AGRO3) share price is up 66% in the last 5 years, clearly besting the market return of around 25% (ignoring dividends).

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

See our latest analysis for BrasilAgro - Companhia Brasileira de Propriedades Agrícolas

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, BrasilAgro - Companhia Brasileira de Propriedades Agrícolas actually saw its EPS drop 21% per year.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We note that the dividend is higher than it was previously - always nice to see. Maybe dividend investors have helped support the share price. The revenue growth of about 29% per year might also encourage buyers.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling BrasilAgro - Companhia Brasileira de Propriedades Agrícolas stock, you should check out this FREE detailed 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of BrasilAgro - Companhia Brasileira de Propriedades Agrícolas, it has a TSR of 148% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 1.9% in the last year, BrasilAgro - Companhia Brasileira de Propriedades Agrícolas shareholders lost 3.2% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 20%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand BrasilAgro - Companhia Brasileira de Propriedades Agrícolas better, we need to consider many other factors. Even so, be aware that BrasilAgro - Companhia Brasileira de Propriedades Agrícolas is showing 3 warning signs in our investment analysis , and 1 of those is concerning...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.