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There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the United States Cellular Corporation (NYSE:USM), share price is up over the last year, but its gain of 19% trails the market return. The longer term returns have not been as good, with the stock price only 7.7% higher than it was three years ago.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 year United States Cellular grew its earnings per share (EPS) by 51%. It's fair to say that the share price gain of 19% did not keep pace with the EPS growth. So it seems like the market has cooled on United States Cellular, despite the growth. Interesting.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that United States Cellular has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
United States Cellular shareholders are up 19% for the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 1.7% per year, over five years. It could well be that the business is stabilizing. 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. For example, we've discovered 3 warning signs for United States Cellular that you should be aware of before investing here.
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.
This article by Simply Wall St is general in nature. 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.
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