The three-year decline in earnings for Transmissora Aliança de Energia Elétrica BVMF:TAEE11) isn't encouraging, but shareholders are still up 12% over that period

One of the frustrations of investing is when a stock goes down. But it's hard to avoid some disappointing investments when the overall market is down. The Transmissora Aliança de Energia Elétrica S.A. (BVMF:TAEE11) is down 17% over three years, but the total shareholder return is 12% once you include the dividend. That's better than the market which declined 9.7% over the last three years.

With the stock having lost 3.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View 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 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.

Transmissora Aliança de Energia Elétrica saw its EPS decline at a compound rate of 13% per year, over the last three years. This fall in the EPS is worse than the 6% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

We know that Transmissora Aliança de Energia Elétrica has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Transmissora Aliança de Energia Elétrica the TSR over the last 3 years was 12%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Transmissora Aliança de Energia Elétrica shareholders are down 6.2% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.8%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Of course Transmissora Aliança de Energia Elétrica may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.