If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Bunge Global SA (NYSE:BG) share price is 89% higher than it was five years ago, which is more than the market average. It's also good to see that the stock is up 13% in a year.
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.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Over half a decade, Bunge Global managed to grow its earnings per share at 45% a year. This EPS growth is higher than the 14% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.15.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Bunge Global 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?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bunge Global the TSR over the last 5 years was 118%, 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
Bunge Global provided a TSR of 16% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 17% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Bunge Global better, we need to consider many other factors. For example, we've discovered 2 warning signs for Bunge Global (1 is a bit concerning!) that you should be aware of before investing here.
Of course Bunge Global may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com