While Select Medical Holdings Corporation (NYSE:SEM) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 25% in the last quarter. On the other hand the share price is higher than it was three years ago. Arguably you’d have been better off buying an index fund, because the gain of 34% in three years isn’t amazing.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).
Select Medical Holdings was able to grow its EPS at 0.9% per year over three years, sending the share price higher. In comparison, the 10% per year gain in the share price outpaces the EPS growth. 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.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Select Medical Holdings’s key metrics by checking this interactive graph of Select Medical Holdings’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Select Medical Holdings’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Select Medical Holdings’s TSR of 34% over the last 3 years is better than the share price return.
A Different Perspective
Select Medical Holdings shareholders are down 25% for the year, but the market itself is up 1.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 3.6%, 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. Before spending more time on Select Medical Holdings it might be wise to click here to see if insiders have been buying or selling shares.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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