The Parque Arauco (SNSE:PARAUCO) Share Price Is Up 44% And Shareholders Are Holding On

Diversification is a key tool for dealing with stock price volatility. But the goal is to pick stocks that do better than average. One such company is Parque Arauco S.A. (SNSE:PARAUCO), which saw its share price increase 44% in the last year, slightly above the market return of around 43% (not including dividends). On the other hand, longer term shareholders have had a tougher run, with the stock falling 27% in three years.

Check out our latest analysis for Parque Arauco

Given that Parque Arauco only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last year Parque Arauco saw its revenue shrink by 38%. Despite the lack of revenue growth, the stock has returned a solid 44% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Parque Arauco stock, you should check out this FREE detailed report on its balance sheet.

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. In the case of Parque Arauco, it has a TSR of 47% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Parque Arauco shareholders have received returns of 47% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 4%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Parque Arauco is showing 3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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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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