IBOVESPA Companies’ Profits Have More Than Doubled in Six Years

RIO DE JANEIRO, BRAZIL – For those who were encouraged by the 31.5 percent return of the IBOVESPA in 2019, the broader view of the main index of the Brazilian Stock Exchange shows that those who invested in this market six years ago have seen their capital more than double.

A survey conducted by the ‘Comdinheiro’ market analysis system shows that, since December 2013, the IBOVESPA has risen 113.6 percent, from 51,507 points to 115,645 points.

In addition, ‘Comdinheiro’ shows that there is consistency in this growth, since the net income of companies that are part of the IBOVESPA rose from R$113.8 (US$28.6) billion to R$243.1 billion in the same period, an increase of 124.5 percent.

“These figures show that there is a great correlation between company profits and index returns. There is an old maxim that says that politics does not matter: if companies make a profit, the index will rise,” says Guilherme Carter, in charge of the ‘Comdinheiro’ survey.

“If there were a big difference between the two growths, we could be concerned that we have gone through an exaggerated euphoria in recent years,” he explains.

To conduct the survey, ‘Comdinheiro’ calculated the annual profits of companies part of the index in December of each year since 2013.

For 2019, the assessment ran from the fourth quarter of 2018 to the third quarter of last year, as the companies have so far failed to present financial data for the last three months of the year.

The survey further shows that the increase was concentrated in the last three years. Between 2013 and 2015, there was a sharp drop in IBOVESPA companies’ profits, from R$113.8 billion to R$14.9 billion.

“It was an atypical period,” says Carter, noting that much of the low profit was due to Petrobras’ loss and a sharp drop in the profit of some large companies. Over the same period, the IBOVESPA dropped 15.8 percent, to 43,349 points.

Conversely, between the end of 2015 and 2016, there was a strong rebound, with the index returning to 60,227 points – up 38.9 percent – while the companies’ profits reached R$112.4 billion.

Considering the minimum of 43,349 points in December 2015, IBOVESPA rose 167 percent until the end of 2019. The total profit of the companies included in the index increased some 16 times.

The company with the highest profit growth in these six years was JBS (JBSS3), up by 302 percent to R$4.5 billion at the end of the third quarter last year. In the same period, its shares rose 138 percent.

Next came Lojas Renner (LREN3) and B3 (B3SA3), whose shares increased 329 percent and 348 percent, respectively, in the period.

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