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DaVita's (NYSE:DVA) investors will be pleased with their notable 68% return over the last three years

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It hasn't been the best quarter for DaVita Inc. (NYSE:DVA) shareholders, since the share price has fallen 25% in that time. But at least the stock is up over the last three years. In that time, it is up 68%, which isn't bad, but not amazing either.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for DaVita

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, DaVita achieved compound earnings per share growth of 40% per year. This EPS growth is higher than the 19% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.23.

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

earnings-per-share-growth
earnings-per-share-growth

We know that DaVita has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on DaVita's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 18% in the last year, DaVita shareholders lost 9.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand DaVita better, we need to consider many other factors. Take risks, for example - DaVita has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.