Suzano (BVMF:SUZB3) shareholders have earned a 15% CAGR over the last five years

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. To wit, the Suzano share price has climbed 85% in five years, easily topping the market return of 4.0% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 10%, including dividends.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Suzano

While Suzano made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years Suzano saw its revenue grow at 13% per year. That's a fairly respectable growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 13% full reflects the underlying business growth. If revenue growth can maintain for long enough, it's likely profits will flow. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Suzano is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Suzano's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Suzano's TSR of 101% over the last 5 years is better than the share price return.

A Different Perspective

Suzano shareholders gained a total return of 10% during the year. But that was short of the market average. 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 15% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Suzano (at least 1 which is significant) , and understanding them should be part of your investment process.

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.