Earnings are growing at Corticeira Amorim S.G.P.S (ELI:COR) but shareholders still don't like its prospects

August 31, 2022
  •  Updated
November 23, 2022
ENXTLS:COR
Source: Shutterstock

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Corticeira Amorim, S.G.P.S., S.A. (ELI:COR) have tasted that bitter downside in the last year, as the share price dropped 13%. That falls noticeably short of the market return of around 15%. Longer term investors have fared much better, since the share price is up 9.9% in three years.

Since Corticeira Amorim S.G.P.S has shed €53m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

However if you'd rather see where the opportunities and risks are within COR's industry, you can check out our analysis on the XX Packaging industry.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Even though the Corticeira Amorim S.G.P.S share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

Corticeira Amorim S.G.P.S' revenue is actually up 22% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
ENXTLS:COR Earnings and Revenue Growth August 31st 2022

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think Corticeira Amorim S.G.P.S will earn in the future (free profit forecasts).

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Corticeira Amorim S.G.P.S, it has a TSR of -11% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 15% in the last year, Corticeira Amorim S.G.P.S shareholders lost 11% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 0.1%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Corticeira Amorim S.G.P.S .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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

Find out whether Corticeira Amorim S.G.P.S 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.

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