Rumo's (BVMF:RAIL3) three-year earnings growth trails the 4.5% YoY shareholder returns

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the Rumo S.A. (BVMF:RAIL3) share price is up 13% in the last three years, clearly besting the market decline of around 19% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 3.5%, including dividends.

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

Check out our latest analysis for Rumo

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Rumo was able to grow its EPS at 8.7% per year over three years, sending the share price higher. The average annual share price increase of 4% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Rumo has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Rumo will grow revenue in the future.

A Different Perspective

Rumo shareholders are up 3.5% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 0.8% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. For example, we've discovered 2 warning signs for Rumo (1 is potentially serious!) that you should be aware of before investing here.

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.

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.

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