Shareholders Of Transmissora Aliança de Energia Elétrica (BVMF:TAEE11) Must Be Happy With Their 249% Total Return

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Transmissora Aliança de Energia Elétrica S.A. (BVMF:TAEE11) which saw its share price drive 107% higher over five years. Also pleasing for shareholders was the 19% gain in the last three months. But this could be related to the strong market, which is up 21% in the last three months.

Check out our latest analysis for Transmissora Aliança de Energia Elétrica

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, Transmissora Aliança de Energia Elétrica achieved compound earnings per share (EPS) growth of 15% per year. So the EPS growth rate is rather close to the annualized share price gain of 16% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Transmissora Aliança de Energia Elétrica has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Transmissora Aliança de Energia Elétrica's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Transmissora Aliança de Energia Elétrica, it has a TSR of 249% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Transmissora Aliança de Energia Elétrica shareholders have received a total shareholder return of 20% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 28% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Transmissora Aliança de Energia Elétrica better, we need to consider many other factors. Even so, be aware that Transmissora Aliança de Energia Elétrica is showing 3 warning signs in our investment analysis , you should know about...

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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