Despite the downward trend in earnings at TIM (BVMF:TIMS3) the stock ascends 3.9%, bringing five-year gains to 74%

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term TIM S.A. (BVMF:TIMS3) shareholders have enjoyed a 35% share price rise over the last half decade, well in excess of the market return of around 25% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 9.3%, including dividends.

Since it's been a strong week for TIM shareholders, let's have a look at trend of the longer term fundamentals.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

TIM's earnings per share are down 2.7% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

In contrast revenue growth of 9.5% per year is probably viewed as evidence that TIM is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

TIM is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for TIM in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for TIM the TSR over the last 5 years was 74%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that TIM has rewarded shareholders with a total shareholder return of 9.3% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 12% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand TIM better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with TIM , and understanding them should be part of your investment process.

But note: TIM may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.