Blau Farmacêutica's (BVMF:BLAU3) one-year earnings growth trails the shareholder returns

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Blau Farmacêutica S.A. (BVMF:BLAU3) share price is 19% higher than it was a year ago, much better than the market decline of around 15% (not including dividends) in the same period. That's a solid performance by our standards! Blau Farmacêutica hasn't been listed for long, so it's still not clear if it is a long term winner.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Blau Farmacêutica

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

During the last year Blau Farmacêutica grew its earnings per share (EPS) by 13%. This EPS growth is significantly lower than the 19% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Blau Farmacêutica has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Blau Farmacêutica will grow revenue in the future.

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 Blau Farmacêutica the TSR over the last 1 year was 23%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Blau Farmacêutica boasts a total shareholder return of 23% for the last year (that includes the dividends) . And the share price momentum remains respectable, with a gain of 26% in the last three months. This suggests the company is continuing to win over new investors. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Blau Farmacêutica (of which 1 is potentially serious!) you should know about.

But note: Blau Farmacêutica may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on BR 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.