Companhia Estadual de Distribuição de Energia Elétrica (BVMF:CEED3 shareholders incur further losses as stock declines 19% this week, taking three-year losses to 40%

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Companhia Estadual de Distribuição de Energia Elétrica (BVMF:CEED3) shareholders, since the share price is down 40% in the last three years, falling well short of the market decline of around 13%. And more recent buyers are having a tough time too, with a drop of 21% in the last year.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Companhia Estadual de Distribuição de Energia Elétrica

Companhia Estadual de Distribuição de Energia Elétrica wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last three years, Companhia Estadual de Distribuição de Energia Elétrica saw its revenue grow by 10% per year, compound. That's a pretty good rate of top-line growth. Shareholders have endured a share price decline of 12% per year. This implies the market had higher expectations of Companhia Estadual de Distribuição de Energia Elétrica. However, that's in the past now, and it's the future is more important - and the future looks brighter (based on revenue, anyway).

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While the broader market gained around 7.0% in the last year, Companhia Estadual de Distribuição de Energia Elétrica shareholders lost 21%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For example, we've discovered 2 warning signs for Companhia Estadual de Distribuição de Energia Elétrica that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.