Investors in BB Seguridade Participações (BVMF:BBSE3) have seen respectable returns of 88% over the past five years

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the BB Seguridade Participações share price has climbed 25% in five years, easily topping the market decline of 0.7% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 5.8% in the last year, including dividends.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, BB Seguridade Participações managed to grow its earnings per share at 7.4% a year. This EPS growth is higher than the 5% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 6.97 also suggests market apprehension.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into BB Seguridade Participações' key metrics by checking this interactive graph of BB Seguridade Participações's earnings, revenue and cash flow.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of BB Seguridade Participações, it has a TSR of 88% 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

BB Seguridade Participações shareholders are up 5.8% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 13% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand BB Seguridade Participações better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with BB Seguridade Participações , and understanding them should be part of your investment process.

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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.