Companhia Siderúrgica Nacional's (BVMF:CSNA3) three-year decline in earnings translates into losses for shareholders

Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Companhia Siderúrgica Nacional (BVMF:CSNA3) have had an unfortunate run in the last three years. Sadly for them, the share price is down 71% in that time. Furthermore, it's down 19% in about a quarter. That's not much fun for holders.

The recent uptick of 5.2% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Companhia Siderúrgica Nacional

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Companhia Siderúrgica Nacional moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. Revenue has been pretty flat over three years, so that isn't an obvious reason shareholders would sell. A closer look at revenue and profit trends might yield insights.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Companhia Siderúrgica Nacional has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Companhia Siderúrgica Nacional

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Companhia Siderúrgica Nacional, it has a TSR of -58% for the last 3 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

It's nice to see that Companhia Siderúrgica Nacional shareholders have received a total shareholder return of 8.9% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Companhia Siderúrgica Nacional (at least 2 which are a bit unpleasant) , 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.

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