Positive earnings growth hasn't been enough to get NOS S.G.P.S (ELI:NOS) shareholders a favorable return over the last five years

NOS, S.G.P.S., S.A. (ELI:NOS) shareholders should be happy to see the share price up 10% in the last month. But over the last half decade, the stock has not performed well. In fact, the share price is down 35%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added €148m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Check out our latest analysis for NOS S.G.P.S

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the unfortunate half decade during which the share price slipped, NOS S.G.P.S actually saw its earnings per share (EPS) improve by 2.4% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Looking to other metrics might better explain the share price change.

We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline.

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

NOS S.G.P.S is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think NOS S.G.P.S will earn in the future (free analyst consensus estimates)

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of NOS S.G.P.S, it has a TSR of -3.7% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 3.6% in the twelve months, NOS S.G.P.S shareholders did even worse, losing 10.0% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand NOS S.G.P.S better, we need to consider many other factors. For instance, we've identified 3 warning signs for NOS S.G.P.S (1 is potentially serious) that you should be aware of.

But note: NOS S.G.P.S 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 Portuguese 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.