The past year for Multiplan Empreendimentos Imobiliários (BVMF:MULT3) investors has not been profitable

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Multiplan Empreendimentos Imobiliários S.A. (BVMF:MULT3) shareholders over the last year, as the share price declined 11%. That falls noticeably short of the market return of around 17%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 6.9% in three years.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

View our latest analysis for Multiplan Empreendimentos Imobiliários

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate twelve months during which the Multiplan Empreendimentos Imobiliários share price fell, it actually saw its earnings per share (EPS) improve by 34%. It could be that the share price was previously over-hyped.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

We don't see any weakness in the Multiplan Empreendimentos Imobiliários' dividend so the steady payout can't really explain the share price drop. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.

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 Multiplan Empreendimentos Imobiliários has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Multiplan Empreendimentos Imobiliários in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Multiplan Empreendimentos Imobiliários, it has a TSR of -8.1% for the last 1 year. 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

While the broader market gained around 17% in the last year, Multiplan Empreendimentos Imobiliários shareholders lost 8.1% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 instance, we've identified 2 warning signs for Multiplan Empreendimentos Imobiliários that you should be aware of.

Of course Multiplan Empreendimentos Imobiliários may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.