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Investors one-year returns in Universal Health Services (NYSE:UHS) have grown faster than the company's underlying earnings growth

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Universal Health Services, Inc. (NYSE:UHS) shareholders might be concerned after seeing the share price drop 16% in the last quarter. Taking a longer term view we see the stock is up over one year. However, its return of 18% does fall short of the market return of, 25%.

Since the long term performance has been good but there's been a recent pullback of 3.7%, let's check if the fundamentals match the share price.

View our latest analysis for Universal Health Services

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year Universal Health Services grew its earnings per share (EPS) by 51%. It's fair to say that the share price gain of 18% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Universal Health Services as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 9.91.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Universal Health Services' earnings, revenue and cash flow.

A Different Perspective

Universal Health Services provided a TSR of 18% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 0.8% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Universal Health Services better, we need to consider many other factors. For instance, we've identified 2 warning signs for Universal Health Services that 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.

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.

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