Investors one-year losses continue as Localiza Rent a Car (BVMF:RENT3) dips a further 4.3% this week, earnings continue to decline

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Localiza Rent a Car S.A. (BVMF:RENT3) share price slid 37% over twelve months. That's well below the market return of 7.4%. Notably, shareholders had a tough run over the longer term, too, with a drop of 36% in the last three years. Furthermore, it's down 17% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

If the past week is anything to go by, investor sentiment for Localiza Rent a Car isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Localiza Rent a Car

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 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.

Unfortunately Localiza Rent a Car reported an EPS drop of 3.4% for the last year. This reduction in EPS is not as bad as the 37% share price fall. So it seems the market was too confident about the business, a year ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Localiza Rent a Car's key metrics by checking this interactive graph of Localiza Rent a Car's earnings, revenue and cash flow.

A Different Perspective

Investors in Localiza Rent a Car had a tough year, with a total loss of 35% (including dividends), against a market gain of about 7.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. To that end, you should learn about the 4 warning signs we've spotted with Localiza Rent a Car (including 2 which shouldn't be ignored) .

We will like Localiza Rent a Car better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.