Equatorial Pará Distribuidora de Energia's (BVMF:EQPA3) 26% CAGR outpaced the company's earnings growth over the same five-year period

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term Equatorial Pará Distribuidora de Energia S.A. (BVMF:EQPA3) shareholders would be well aware of this, since the stock is up 105% in five years. We note the stock price is up 3.9% in the last seven days.

Since it's been a strong week for Equatorial Pará Distribuidora de Energia shareholders, let's have a look at trend of the longer term fundamentals.

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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 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, Equatorial Pará Distribuidora de Energia achieved compound earnings per share (EPS) growth of 30% per year. The EPS growth is more impressive than the yearly share price gain of 15% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.32.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Equatorial Pará Distribuidora de Energia'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Equatorial Pará Distribuidora de Energia the TSR over the last 5 years was 215%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Equatorial Pará Distribuidora de Energia had a tough year, with a total loss of 21% (including dividends), 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. Longer term investors wouldn't be so upset, since they would have made 26%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Equatorial Pará Distribuidora de Energia better, we need to consider many other factors. Take risks, for example - Equatorial Pará Distribuidora de Energia has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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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.