One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, Brioschi Sviluppo Immobiliare spa (BIT:BRI) shareholders have seen the share price rise 57% over three years, well in excess of the market return (4.9%, not including dividends).
Brioschi Sviluppo Immobiliare wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Brioschi Sviluppo Immobiliare actually saw its revenue drop by 15% per year over three years. Despite the lack of revenue growth, the stock has returned 16%, compound, over three years. Unless the company is going to make profits soon, we would be pretty cautious about it.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Brioschi Sviluppo Immobiliare's financial health with this free report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Brioschi Sviluppo Immobiliare's TSR for the last 3 years was 61%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Brioschi Sviluppo Immobiliare shareholders have received a total shareholder return of 60% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 0.8%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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