Moura Dubeux Engenharia (BVMF:MDNE3) sheds 12% this week, as yearly returns fall more in line with earnings growth

It might be of some concern to shareholders to see the Moura Dubeux Engenharia S.A. (BVMF:MDNE3) share price down 12% in the last month. But that doesn't change the fact that the returns over the last three years have been spectacular. Indeed, the share price is up a whopping 382% in that time. Arguably, the recent fall is to be expected after such a strong rise. The share price action could signify that the business itself is dramatically improved, in that time.

Although Moura Dubeux Engenharia has shed R$288m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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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 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.

Moura Dubeux Engenharia was able to grow its EPS at 47% per year over three years, sending the share price higher. In comparison, the 69% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

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

We know that Moura Dubeux Engenharia has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Moura Dubeux Engenharia, it has a TSR of 429% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Moura Dubeux Engenharia has rewarded shareholders with a total shareholder return of 124% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. 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. For example, we've discovered 2 warning signs for Moura Dubeux Engenharia (1 is concerning!) that you should be aware of before investing here.

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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.