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Companhia de Saneamento de Minas Gerais' (BVMF:CSMG3) earnings growth rate lags the 58% CAGR delivered to shareholders

Simply Wall St · 6d ago

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Companhia de Saneamento de Minas Gerais (BVMF:CSMG3) share price has flown 173% in the last three years. That sort of return is as solid as granite. On top of that, the share price is up 28% in about a quarter.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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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. 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, Companhia de Saneamento de Minas Gerais achieved compound earnings per share growth of 28% per year. In comparison, the 40% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.

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

earnings-per-share-growth
BOVESPA:CSMG3 Earnings Per Share Growth January 6th 2026

It might be well worthwhile taking a look at our free report on Companhia de Saneamento de Minas Gerais' earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Companhia de Saneamento de Minas Gerais' TSR for the last 3 years was 292%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Companhia de Saneamento de Minas Gerais shareholders have received a total shareholder return of 120% over one year. And that does include the dividend. That's better than the annualised return of 33% over half a decade, implying that the company is doing better recently. 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 2 warning signs for Companhia de Saneamento de Minas Gerais you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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