Locaweb Serviços de Internet S.A. (BVMF:LWSA3) shareholders might be concerned after seeing the share price drop 15% in the last quarter. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. To wit, it had solidly beat the market, up 43%.
Since the long term performance has been good but there's been a recent pullback of 3.2%, let's check if the fundamentals match the share price.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Over the last twelve months, Locaweb Serviços de Internet actually shrank its EPS by 38%.
Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
We doubt the modest 0.1% dividend yield is doing much to support the share price. However the year on year revenue growth of 43% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Locaweb Serviços de Internet boasts a total shareholder return of 44% for the last year (that includes the dividends) . Unfortunately the share price is down 15% over the last quarter. Shorter term share price moves often don't signify much about the business itself. 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. For example, we've discovered 3 warning signs for Locaweb Serviços de Internet that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on BR exchanges.
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.
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