Yahoo Finance Investors in Banco Latinoamericano de Comercio Exterior S. A (NYSE:BLX) have seen impressive returns of 124% over the past three years
By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Banco Latinoamericano de Comercio Exterior, S. A. (NYSE:BLX), which is up 87%, over three years, soundly beating the market return of 15% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 46%, including dividends.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Banco Latinoamericano de Comercio Exterior S. A
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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Banco Latinoamericano de Comercio Exterior S. A achieved compound earnings per share growth of 50% per year. This EPS growth is higher than the 23% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 5.80 also reflects the negative sentiment around the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Banco Latinoamericano de Comercio Exterior S. A has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Banco Latinoamericano de Comercio Exterior S. A's TSR for the last 3 years was 124%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Banco Latinoamericano de Comercio Exterior S. A has rewarded shareholders with a total shareholder return of 46% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 instance, we've identified 1 warning sign for Banco Latinoamericano de Comercio Exterior S. A that you should be aware of.
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 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
