Those who invested in Banco Latinoamericano de Comercio Exterior S. A (NYSE:BLX) three years ago are up 113%
By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, Banco Latinoamericano de Comercio Exterior, S. A. (NYSE:BLX) shareholders have seen the share price rise 75% over three years, well in excess of the market return (35%, not including dividends).
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Banco Latinoamericano de Comercio Exterior S. A
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Banco Latinoamericano de Comercio Exterior S. A was able to grow its EPS at 16% per year over three years, sending the share price higher. This EPS growth is lower than the 21% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Banco Latinoamericano de Comercio Exterior S. A has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Banco Latinoamericano de Comercio Exterior S. A's TSR for the last 3 years was 113%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
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 72% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Banco Latinoamericano de Comercio Exterior S. A is showing 1 warning sign in our investment analysis , you should know about...
We will like Banco Latinoamericano de Comercio Exterior S. A better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.
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