Despite the downward trend in earnings at Sociedad Matriz SAAM (SNSE:SMSAAM) the stock ascends 5.6%, bringing three-year gains to 257%

It hasn't been the best quarter for Sociedad Matriz SAAM S.A. (SNSE:SMSAAM) shareholders, since the share price has fallen 10% in that time. But that doesn't change the fact that the returns over the last three years have been very strong. In fact, the share price is up a full 124% compared to three years ago. It's not uncommon to see a share price retrace a bit, after a big gain. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

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

See our latest analysis for Sociedad Matriz SAAM

Sociedad Matriz SAAM recorded just US$553,453,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. Investors will be hoping that Sociedad Matriz SAAM can make progress and gain better traction for the business, before it runs low on cash.

We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Sociedad Matriz SAAM investors might know.

Sociedad Matriz SAAM had liabilities exceeding cash by US$153m when it last reported in March 2024, according to our data. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 91% per year, over 3 years , but we're happy for holders. Investors must really like its potential. You can see in the image below, how Sociedad Matriz SAAM's cash levels have changed over time (click to see the values).

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.

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. We note that for Sociedad Matriz SAAM the TSR over the last 3 years was 257%, 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 Sociedad Matriz SAAM has rewarded shareholders with a total shareholder return of 62% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 24%. Therefore it seems like sentiment around the company has been positive lately. 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 Sociedad Matriz SAAM better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Sociedad Matriz SAAM (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

But note: Sociedad Matriz SAAM 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 Chilean exchanges.

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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.

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