Investors in StoneCo (NASDAQ:STNE) have unfortunately lost 68% over the last five years

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. To wit, the StoneCo Ltd. (NASDAQ:STNE) share price managed to fall 68% over five long years. That's not a lot of fun for true believers.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for StoneCo

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, StoneCo actually saw its earnings per share (EPS) improve by 24% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

Revenue is actually up 37% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

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

StoneCo is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

StoneCo provided a TSR of 6.1% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 11% endured over half a decade. It could well be that the business is stabilizing. 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. For example, we've discovered 1 warning sign for StoneCo that you should be aware of before investing here.

Of course StoneCo may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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