Movida Participações (BVMF:MOVI3) adds R$165m to market cap in the past 7 days, though investors from five years ago are still down 78%

It's nice to see the Movida Participações S.A. (BVMF:MOVI3) share price up 14% in a week. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Five years have seen the share price descend precipitously, down a full 82%. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The real question is whether the business can leave its past behind and improve itself over the years ahead. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

See our latest analysis for Movida Participações

Given that Movida Participações didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last half decade, Movida Participações saw its revenue increase by 28% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price has averaged a fall of 13% each year, in the same time period. You'd have to assume the market is worried that profits won't come soon enough. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Movida Participações is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Movida Participações will earn in the future (free analyst consensus estimates)

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Movida Participações the TSR over the last 5 years was -78%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Movida Participações shareholders are down 58% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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. Even so, be aware that Movida Participações is showing 3 warning signs in our investment analysis , you should know about...

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 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.