Shareholders Of Companhiade Eletricidade do Estado da Bahia - COELBA (BVMF:CEEB3) Must Be Happy With Their 105% Total Return

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Companhiade Eletricidade do Estado da Bahia - COELBA (BVMF:CEEB3), which is up 69%, over three years, soundly beating the market return of 42% (not including dividends).

View our latest analysis for Companhiade Eletricidade do Estado da Bahia - COELBA

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During three years of share price growth, Companhiade Eletricidade do Estado da Bahia - COELBA achieved compound earnings per share growth of 56% per year. This EPS growth is higher than the 19% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 10.36 also reflects the negative sentiment around the stock.

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

This free interactive report on Companhiade Eletricidade do Estado da Bahia - COELBA's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Companhiade Eletricidade do Estado da Bahia - COELBA's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Companhiade Eletricidade do Estado da Bahia - COELBA shareholders, and that cash payout contributed to why its TSR of 105%, over the last 3 years, is better than the share price return.

A Different Perspective

Investors in Companhiade Eletricidade do Estado da Bahia - COELBA had a tough year, with a total loss of 5.8%, against a market gain of about 3.6%. 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 16% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Companhiade Eletricidade do Estado da Bahia - COELBA , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on BR exchanges.

If you’re looking to trade Companhiade Eletricidade do Estado da Bahia - COELBA, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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