Companhia de Eletricidade do Estado da Bahia - COELBA (BVMF:CEEB3) shareholders have earned a 22% CAGR over the last five years

While Companhia de Eletricidade do Estado da Bahia - COELBA (BVMF:CEEB3) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 12% in the last quarter. But that doesn't change the fact that the returns over the last five years have been respectable. After all, the stock has performed better than the market (51%) in that time, and is up 53%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Companhia de Eletricidade do Estado da Bahia - COELBA

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Companhia de Eletricidade do Estado da Bahia - COELBA achieved compound earnings per share (EPS) growth of 38% per year. This EPS growth is higher than the 9% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 6.33 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Companhia de Eletricidade do Estado da Bahia - COELBA's key metrics by checking this interactive graph of Companhia de Eletricidade do Estado da Bahia - COELBA's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Companhia de Eletricidade do Estado da Bahia - COELBA the TSR over the last 5 years was 170%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Companhia de Eletricidade do Estado da Bahia - COELBA shareholders have received a total shareholder return of 7.7% over one year. Of course, that includes the dividend. Having said that, the five-year TSR of 22% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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 2 warning signs we've spotted with Companhia de Eletricidade do Estado da Bahia - COELBA (including 1 which doesn't sit too well with us) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.