Motiva Infraestrutura de Mobilidade (BVMF:MOTV3) shareholders have earned a 56% return over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Motiva Infraestrutura de Mobilidade S.A. (BVMF:MOTV3) share price is up 50% in the last 1 year, clearly besting the market return of around 21% (not including dividends). So that should have shareholders smiling. And shareholders have also done well over the long term, with an increase of 35% in the last three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

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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.

During the last year Motiva Infraestrutura de Mobilidade grew its earnings per share (EPS) by 83%. This EPS growth is significantly higher than the 50% increase in the share price. Therefore, it seems the market isn't as excited about Motiva Infraestrutura de Mobilidade as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 10.67.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Motiva Infraestrutura de Mobilidade has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. We note that for Motiva Infraestrutura de Mobilidade the TSR over the last 1 year was 56%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Motiva Infraestrutura de Mobilidade shareholders have received a total shareholder return of 56% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Case in point: We've spotted 1 warning sign for Motiva Infraestrutura de Mobilidade 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 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.