Did You Participate In Any Of Companhia Energética do Rio Grande do Norte - COSERN's (BVMF:CSRN3) Fantastic 142% Return ?

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Companhia Energética do Rio Grande do Norte - COSERN (BVMF:CSRN3) share price is up 88% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 4.3% in that time.

View our latest analysis for Companhia Energética do Rio Grande do Norte - COSERN

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During five years of share price growth, Companhia Energética do Rio Grande do Norte - COSERN achieved compound earnings per share (EPS) growth of 6.5% per year. This EPS growth is slower than the share price growth of 13% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. As it happens, Companhia Energética do Rio Grande do Norte - COSERN's TSR for the last 5 years was 142%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Companhia Energética do Rio Grande do Norte - COSERN had a tough year, with a total loss of 3.5% (including dividends), against a market gain of about 4.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 19% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Companhia Energética do Rio Grande do Norte - COSERN , and understanding them should be part of your investment process.

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 BR exchanges.

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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.
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