The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. To wit, the Banco Latinoamericano de Comercio Exterior, S. A. (NYSE:BLX) share price has flown 111% in the last three years. Most would be happy with that. It's also good to see the share price up 13% over the last quarter. But this could be related to the strong market, which is up 12% in the last three months.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During three years of share price growth, Banco Latinoamericano de Comercio Exterior S. A achieved compound earnings per share growth of 55% per year. The average annual share price increase of 28% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 6.37 also reflects the negative sentiment around the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Banco Latinoamericano de Comercio Exterior S. A has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Banco Latinoamericano de Comercio Exterior S. A's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. 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 154%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Banco Latinoamericano de Comercio Exterior S. A shareholders have received a total shareholder return of 54% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% per year), it would seem that the stock's performance has improved in recent times. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Banco Latinoamericano de Comercio Exterior S. A , and understanding them should be part of your investment process.
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 undervalued stocks (mostly small caps) 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
