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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the Elevance Health, Inc. (NYSE:ELV) share price has soared 120% in the last half decade. Most would be very happy with that. On top of that, the share price is up 13% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Elevance Health
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During five years of share price growth, Elevance Health achieved compound earnings per share (EPS) growth of 6.9% per year. This EPS growth is slower than the share price growth of 17% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Elevance Health's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Elevance Health the TSR over the last 5 years was 134%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Elevance Health had a tough year, with a total loss of 17% (including dividends), against a market gain of about 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 19% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Elevance Health is showing 1 warning sign in our investment analysis , you should know about...