Those who invested in Equatorial Pará Distribuidora de Energia (BVMF:EQPA3) five years ago are up 396%

Equatorial Pará Distribuidora de Energia S.A. (BVMF:EQPA3) shareholders might be concerned after seeing the share price drop 13% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 215% higher today. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Equatorial Pará Distribuidora de Energia

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 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, Equatorial Pará Distribuidora de Energia achieved compound earnings per share (EPS) growth of 35% per year. This EPS growth is higher than the 26% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 6.90 also suggests market apprehension.

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?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Equatorial Pará Distribuidora de Energia's TSR for the last 5 years was 396%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Equatorial Pará Distribuidora de Energia shareholders have received a total shareholder return of 26% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 38% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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 4 warning signs for Equatorial Pará Distribuidora de Energia (1 doesn't sit too well with us!) that you should be aware of before investing here.

But note: Equatorial Pará Distribuidora de Energia may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.