Should ENCE Energía y Celulosa (BME:ENC) Be Disappointed With Their 44% Profit?

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term ENCE Energía y Celulosa, S.A. (BME:ENC) shareholders have enjoyed a 44% share price rise over the last half decade, well in excess of the market decline of around 0.2% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 17% in the last year.

See our latest analysis for ENCE Energía y Celulosa

Given that ENCE Energía y Celulosa didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, ENCE Energía y Celulosa can boast revenue growth at a rate of 4.6% per year. Put simply, that growth rate fails to impress. While it's hard to say just how much value the company added over five years, the annualised share price gain of 8% seems about right. We'd be looking for the underlying business to grow revenue a bit faster.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between ENCE Energía y Celulosa's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for ENCE Energía y Celulosa shareholders, and that cash payout contributed to why its TSR of 63%, over the last 5 years, is better than the share price return.

A Different Perspective

We're pleased to report that ENCE Energía y Celulosa shareholders have received a total shareholder return of 17% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand ENCE Energía y Celulosa better, we need to consider many other factors. Even so, be aware that ENCE Energía y Celulosa is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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