Companhia de Saneamento Básico do Estado de São Paulo - SABESP's (BVMF:SBSP3) investors will be pleased with their strong 234% return over the last five years

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Companhia de Saneamento Básico do Estado de São Paulo - SABESP (BVMF:SBSP3) stock is up an impressive 200% over the last five years. In the last week shares have slid back 1.1%.

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.

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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 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.

Over half a decade, Companhia de Saneamento Básico do Estado de São Paulo - SABESP managed to grow its earnings per share at 43% a year. This EPS growth is higher than the 25% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Companhia de Saneamento Básico do Estado de São Paulo - SABESP has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Companhia de Saneamento Básico do Estado de São Paulo - SABESP's TSR for the last 5 years was 234%, 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 Companhia de Saneamento Básico do Estado de São Paulo - SABESP has rewarded shareholders with a total shareholder return of 61% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 27% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Companhia de Saneamento Básico do Estado de São Paulo - SABESP better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Companhia de Saneamento Básico do Estado de São Paulo - SABESP you should be aware of.

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