The one-year underlying earnings growth at M. Dias Branco Indústria e Comércio de Alimentos (BVMF:MDIA3) is promising, but the shareholders are still in the red over that time

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. Investors in M. Dias Branco S.A. Indústria e Comércio de Alimentos (BVMF:MDIA3) have tasted that bitter downside in the last year, as the share price dropped 27%. That contrasts poorly with the market return of 16%. At least the damage isn't so bad if you look at the last three years, since the stock is down 15% in that time. The falls have accelerated recently, with the share price down 13% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

After losing 3.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for M. Dias Branco Indústria e Comércio de Alimentos

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the unfortunate twelve months during which the M. Dias Branco Indústria e Comércio de Alimentos share price fell, it actually saw its earnings per share (EPS) improve by 90%. Of course, the situation might betray previous over-optimism about growth.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

In contrast, the 7.2% drop in revenue is a real concern. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.

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

We know that M. Dias Branco Indústria e Comércio de Alimentos has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Investors in M. Dias Branco Indústria e Comércio de Alimentos had a tough year, with a total loss of 26% (including dividends), against a market gain of about 16%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. Is M. Dias Branco Indústria e Comércio de Alimentos cheap compared to other companies? These 3 valuation measures might help you decide.

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.