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Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Amedisys, Inc. (NASDAQ:AMED) shares for the last five years, while they gained 557%. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 11% gain in the last three months.
Anyone who held for that rewarding ride would probably be keen to talk about it.
See our latest analysis for Amedisys
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last half decade, Amedisys became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Amedisys share price has gained 178% in three years. In the same period, EPS is up 50% per year. This EPS growth is higher than the 41% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Amedisys's earnings, revenue and cash flow.
A Different Perspective
We're pleased to report that Amedisys shareholders have received a total shareholder return of 14% over one year. However, that falls short of the 46% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.