WEBULL

Direcional Engenharia's (BVMF:DIRR3) five-year total shareholder returns outpace the underlying earnings growth

Simply Wall St · 2d ago

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Direcional Engenharia S.A. (BVMF:DIRR3) share price has soared 302% over five years. This just goes to show the value creation that some businesses can achieve. But it's down 7.6% in the last week. But this could be related to the soft market, with stocks selling off around 1.6% in the last week.

While the stock has fallen 7.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, Direcional Engenharia achieved compound earnings per share (EPS) growth of 45% per year. The EPS growth is more impressive than the yearly share price gain of 32% over the same period. 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 11.72.

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

earnings-per-share-growth
BOVESPA:DIRR3 Earnings Per Share Growth December 6th 2025

We know that Direcional Engenharia has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Direcional Engenharia's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Direcional Engenharia's TSR for the last 5 years was 466%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Direcional Engenharia shareholders have received a total shareholder return of 90% over the last year. That's including the dividend. That's better than the annualised return of 41% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Direcional Engenharia you should be aware of, and 1 of them is significant.

But note: Direcional Engenharia may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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