Credito Emiliano (BIT:CE) stock performs better than its underlying earnings growth over last three years

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Credito Emiliano S.p.A. (BIT:CE), which is up 88%, over three years, soundly beating the market decline of 1.3% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 17% , including dividends .

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Credito Emiliano

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Credito Emiliano achieved compound earnings per share growth of 40% per year. This EPS growth is higher than the 23% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 5.51 also reflects the negative sentiment around the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Credito Emiliano has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Credito Emiliano's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Credito Emiliano's TSR for the last 3 years was 117%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Credito Emiliano shareholders are up 17% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 15% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Credito Emiliano better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Credito Emiliano you should be aware of, and 1 of them is a bit concerning.

But note: Credito Emiliano 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 Italian 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.