Quiñenco (SNSE:QUINENCO) shareholders have earned a 64% CAGR over the last three years

May 31, 2023

Quiñenco S.A. (SNSE:QUINENCO) shareholders have seen the share price descend 13% over the month. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 155% in that time. It's not uncommon to see a share price retrace a bit, after a big gain. Only time will tell if there is still too much optimism currently reflected in the share price.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Quiñenco

SWOT Analysis for Quiñenco

Strength

Debt is well covered by earnings.

Dividends are covered by earnings and cash flows.

Dividend is in the top 25% of dividend payers in the market.

Dividend information for QUINENCO.

Weakness

Earnings growth over the past year underperformed the Industrials industry.

Current share price is above our estimate of fair value.

Opportunity

QUINENCO's financial characteristics indicate limited near-term opportunities for shareholders.

Lack of analyst coverage makes it difficult to determine QUINENCO's earnings prospects.

Threat

Debt is not well covered by operating cash flow.

Is QUINENCO well equipped to handle threats?

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Quiñenco achieved compound earnings per share growth of 158% per year. This EPS growth is higher than the 37% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 1.55 also reflects the negative sentiment around the stock.

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

Dive deeper into Quiñenco's key metrics by checking this interactive graph of Quiñenco'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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Quiñenco's TSR for the last 3 years was 342%, 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 Quiñenco shareholders have received a total shareholder return of 33% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 23%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that Quiñenco is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

We will like Quiñenco better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chilean exchanges.

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Valuation is complex, but we're here to simplify it.

Discover if Quiñenco might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.