BB Seguridade Participações' (BVMF:BBSE3) 54% YoY earnings expansion surpassed the shareholder returns over the past year

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the BB Seguridade Participações S.A. (BVMF:BBSE3) share price is 35% higher than it was a year ago, much better than the market decline of around 18% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Also impressive, the stock is up 33% over three years, making long term shareholders happy, too.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for BB Seguridade Participações

SWOT Analysis for BB Seguridade Participações

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 last year BB Seguridade Participações grew its earnings per share (EPS) by 54%. It's fair to say that the share price gain of 35% did not keep pace with the EPS growth. So it seems like the market has cooled on BB Seguridade Participações, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 11.55.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that BB Seguridade Participações has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for BB Seguridade Participações the TSR over the last 1 year was 47%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that BB Seguridade Participações has rewarded shareholders with a total shareholder return of 47% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 13% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that BB Seguridade Participações is showing 2 warning signs in our investment analysis , you should know about...

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.