Lojas Renner (BVMF:LREN3) sheds R$574m, company earnings and investor returns have been trending downwards for past five years

It is doubtless a positive to see that the Lojas Renner S.A. (BVMF:LREN3) share price has gained some 45% in the last three months. But that doesn't change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 59% in the period. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.

After losing 3.2% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Lojas Renner

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Looking back five years, both Lojas Renner's share price and EPS declined; the latter at a rate of 0.05% per year. This reduction in EPS is less than the 16% annual reduction in the share price. This implies that the market is more cautious about the business these days.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Lojas Renner has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Lojas Renner stock, you should check out this FREE detailed report on its balance sheet.

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. As it happens, Lojas Renner's TSR for the last 5 years was -54%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Lojas Renner shareholders have received a total shareholder return of 50% over one year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the 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. Case in point: We've spotted 1 warning sign for Lojas Renner you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.