Did Banco de Chile's (SNSE:CHILE) Share Price Deserve to Gain -21%?

Banco de Chile (SNSE:CHILE) shareholders should be happy to see the share price up 16% in the last quarter. It's not great that the stock is down over the last three years. But that's not so bad when you consider its market is down 17%.

See our latest analysis for Banco de Chile

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.

Banco de Chile saw its EPS decline at a compound rate of 7.0% per year, over the last three years. This change in EPS is reasonably close to the 8% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. It seems like the share price is reflecting the declining earnings per share.

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

Dive deeper into Banco de Chile's key metrics by checking this interactive graph of Banco de Chile's earnings, revenue and cash flow.

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 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. In the case of Banco de Chile, it has a TSR of -11% for the last 3 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 Banco de Chile shareholders have received a total shareholder return of 7.8% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 7% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Banco de Chile better, we need to consider many other factors. For instance, we've identified 2 warning signs for Banco de Chile (1 is potentially serious) that you should be aware of.

But note: Banco de Chile 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 CL 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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