The one-year decline in earnings might be taking its toll on Universal Health Services (NYSE:UHS) shareholders as stock falls 6.6% over the past week
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Universal Health Services, Inc. (NYSE:UHS) share price is up 27% in the last 1 year, clearly besting the market return of around 11% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Looking back further, the share price is 26% higher than it was three years ago.
In light of the stock dropping 6.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
Check out 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 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, Universal Health Services actually saw its earnings per share drop 2.7%.
Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We doubt the modest 0.6% dividend yield is doing much to support the share price. We think that the revenue growth of 5.8% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Universal Health Services is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We're pleased to report that Universal Health Services shareholders have received a total shareholder return of 27% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with Universal Health Services .
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 American exchanges.
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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.
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