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Can You Imagine How DaVita's (NYSE:DVA) Shareholders Feel About The 15% Share Price Increase?

Simply Wall St

Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the DaVita Inc. (NYSE:DVA) share price is up 15% in the last three years, that falls short of the market return. In the last year the stock price gained, albeit only 1.8%.

Check out our latest analysis for DaVita

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.

DaVita was able to grow its EPS at 3.2% per year over three years, sending the share price higher. This EPS growth is lower than the 4.6% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

NYSE:DVA Past and Future Earnings, November 12th 2019

Dive deeper into DaVita's key metrics by checking this interactive graph of DaVita's earnings, revenue and cash flow.

A Different Perspective

DaVita provided a TSR of 1.8% over the last twelve months. 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. So this might be a sign the business has turned its fortunes around. Is DaVita cheap compared to other companies? These 3 valuation measures might help you decide.

Of course DaVita may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.