Shareholders in PagSeguro Digital (NYSE:PAGS) are in the red if they invested five years ago

We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding PagSeguro Digital Ltd. (NYSE:PAGS) during the five years that saw its share price drop a whopping 79%. Furthermore, it's down 39% in about a quarter. That's not much fun for holders.

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 PagSeguro Digital

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

While the share price declined over five years, PagSeguro Digital actually managed to increase EPS by an average of 10% 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). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

In contrast to the share price, revenue has actually increased by 26% a year in the five year 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.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

PagSeguro Digital 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 PagSeguro Digital will earn in the future (free analyst consensus estimates)

A Different Perspective

PagSeguro Digital shareholders gained a total return of 8.6% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 12% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand PagSeguro Digital better, we need to consider many other factors. Take risks, for example - PagSeguro Digital has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.