The three-year shareholder returns and company earnings persist lower as São Carlos Empreendimentos e Participações (BVMF:SCAR3) stock falls a further 10% in past week

For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term São Carlos Empreendimentos e Participações S.A. (BVMF:SCAR3) shareholders have had that experience, with the share price dropping 44% in three years, versus a market decline of about 13%. Furthermore, it's down 13% in about a quarter. That's not much fun for holders.

If the past week is anything to go by, investor sentiment for São Carlos Empreendimentos e Participações isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for São Carlos Empreendimentos e Participações

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

São Carlos Empreendimentos e Participações became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

With a rather small yield of just 0.7% we doubt that the stock's share price is based on its dividend. Revenue is actually up 27% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating São Carlos Empreendimentos e Participações further; while we may be missing something on this analysis, there might also be an opportunity.

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 São Carlos Empreendimentos e Participações 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 São Carlos Empreendimentos e Participações

A Different Perspective

Investors in São Carlos Empreendimentos e Participações had a tough year, with a total loss of 17% (including dividends), against a market gain of about 7.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. To that end, you should learn about the 2 warning signs we've spotted with São Carlos Empreendimentos e Participações (including 1 which is significant) .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.