São Martinho (BVMF:SMTO3) shareholders have earned a 17% CAGR over the last five years

São Martinho S.A. (BVMF:SMTO3) shareholders have seen the share price descend 10% over the month. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 78% in that time.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for São Martinho

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, São Martinho achieved compound earnings per share (EPS) growth of 15% per year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 11.67 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on São Martinho's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for São Martinho the TSR over the last 5 years was 117%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

São Martinho shareholders are up 5.9% for the year (even including dividends). Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 17% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand São Martinho better, we need to consider many other factors. Take risks, for example - São Martinho has 4 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.