SIMPAR's (BVMF:SIMH3) one-year decline in earnings translates into losses for shareholders

It is a pleasure to report that the SIMPAR S.A. (BVMF:SIMH3) is up 34% in the last quarter. But that doesn't change the fact that the returns over the last year have been less than pleasing. In fact, the price has declined 10% in a year, falling short of the returns you could get by investing in an index fund.

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

See our latest analysis for SIMPAR

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unfortunately SIMPAR reported an EPS drop of 69% for the last year. This fall in the EPS is significantly worse than the 10% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.

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

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

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for SIMPAR the TSR over the last 1 year was -7.9%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Given that the market gained 12% in the last year, SIMPAR shareholders might be miffed that they lost 7.9% (even including dividends). While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. Putting aside the last twelve months, it's good to see the share price has rebounded by 34%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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. Take risks, for example - SIMPAR has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.

Of course SIMPAR may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.