Bicecorp's (SNSE:BICECORP) 10% CAGR outpaced the company's earnings growth over the same five-year period

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, the Bicecorp S.A. (SNSE:BICECORP) share price is up 29% in the last 5 years, clearly besting the market decline of around 19% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.8% in the last year , including dividends .

The past week has proven to be lucrative for Bicecorp investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Bicecorp

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Bicecorp achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is higher than the 5% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.43.

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

This free interactive report on Bicecorp's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. We note that for Bicecorp the TSR over the last 5 years was 62%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Bicecorp provided a TSR of 2.8% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 10% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Bicecorp , and understanding them should be part of your investment process.

But note: Bicecorp 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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.