Stock Analysis

If You Had Bought Empresas Copec (SNSE:COPEC) Shares Five Years Ago You'd Have Earned 39% Returns

SNSE:COPEC
Source: Shutterstock

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Empresas Copec S.A. (SNSE:COPEC) shareholders have enjoyed a 39% share price rise over the last half decade, well in excess of the market decline of around 4.6% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 27% , including dividends .

View our latest analysis for Empresas Copec

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Empresas Copec actually saw its EPS drop 13% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 0.4% dividend yield is unlikely to be propping up the share price. On the other hand, Empresas Copec's revenue is growing nicely, at a compound rate of 6.2% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
SNSE:COPEC Earnings and Revenue Growth February 25th 2021

Empresas Copec is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Empresas Copec in this interactive graph of future profit estimates.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Empresas Copec the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Empresas Copec has rewarded shareholders with a total shareholder return of 27% in the last twelve months. That's including the dividend. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Empresas Copec better, we need to consider many other factors. For instance, we've identified 2 warning signs for Empresas Copec (1 is a bit concerning) that you should be aware of.

But note: Empresas Copec 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.

When trading Empresas Copec or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether Empresas Copec is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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