While shareholders of EcoRodovias Infraestrutura e Logística (BVMF:ECOR3) are in the red over the last five years, underlying earnings have actually grown

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term EcoRodovias Infraestrutura e Logística S.A. (BVMF:ECOR3) shareholders for doubting their decision to hold, with the stock down 50% over a half decade. More recently, the share price has dropped a further 8.7% in a month.

The recent uptick of 6.7% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for EcoRodovias Infraestrutura e Logística

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During five years of share price growth, EcoRodovias Infraestrutura e Logística moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

The modest 0.1% dividend yield is unlikely to be guiding the market view of the stock. In contrast to the share price, revenue has actually increased by 21% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

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

We know that EcoRodovias Infraestrutura e Logística has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at EcoRodovias Infraestrutura e Logística's financial health with this free 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, EcoRodovias Infraestrutura e Logística's TSR for the last 5 years was -47%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

EcoRodovias Infraestrutura e Logística provided a TSR of 5.5% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 8% endured over half a decade. It could well be that the business is stabilizing. 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. Take risks, for example - EcoRodovias Infraestrutura e Logística has 2 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.