The easiest way to invest in stocks is to buy exchange traded funds. But you can dramatically increase your returns by choosing above-average stocks. For example, the Ambev SA The share price (BVMF: ABEV3) has risen 43% over the past year, significantly outperforming the market return by around 6.9% (excluding dividends). This should therefore make shareholders smile. However, long-term returns have not been so impressive, with the stock only rising 5.7% in the past three years.

The past week has turned out to be lucrative for Ambev investors. So let’s see if the fundamentals motivated the company’s performance over one year.

Check out our latest analysis for Ambev

While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just the underlying performance of the company. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

Ambev was able to increase its EPS by 82% in the past twelve months. It’s fair to say that the 43% share price gain has not kept pace with the growth in EPS. As a result, it looks like the market isn’t as excited about Ambev as it used to be. It could be an opportunity.

The graph below illustrates the evolution of EPS over time (reveal the exact values ​​by clicking on the image).

We know that Ambev has improved its results lately, but will it increase its revenue? Check whether analysts believe Ambev will increase revenue in the future.

What about dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. As it turns out, Ambev’s TSR for the past year was 47%, which exceeds the share price return mentioned earlier. This is largely the result of his dividend payments!

A different perspective

We are pleased to report that Ambev shareholders received a total shareholder return of 47% over one year. Of course, this includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 1.9% per year), it seems that the performance of the stock has improved in recent times. At the best of times, this can portend real business momentum, meaning that now may be a good time to dig deeper. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really get an overview, we have to take other information into account as well. Consider risks, for example. Every business has them, and we’ve spotted 2 warning signs for Ambev you should know.

For those who like to find winning investments this free list of growing companies with recent insider buys, might be just the ticket.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the BR exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

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