When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Adecoagro S.A. (NYSE:AGRO) has fallen short of that second goal, with a share price rise of 72% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 38% in the last year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last half decade, Adecoagro became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Adecoagro share price is up 46% in the last three years. In the same period, EPS is up 747% per year. This EPS growth is higher than the 13% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 5.57.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Adecoagro has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Adecoagro'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Adecoagro's TSR for the last 5 years was 84%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Adecoagro shareholders have received a total shareholder return of 43% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Adecoagro better, we need to consider many other factors. Even so, be aware that Adecoagro is showing 3 warning signs in our investment analysis , and 1 of those is concerning...

But note: Adecoagro 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 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.