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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the Elevance Health, Inc. (NYSE:ELV) share price is up 66% in the last five years, slightly above the market return. Zooming in, the stock is actually down 3.6% in the last year.
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 paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Over half a decade, Elevance Health managed to grow its earnings per share at 8.1% a year. This EPS growth is lower than the 11% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Elevance Health's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Elevance Health the TSR over the last 5 years was 76%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Elevance Health shareholders are down 2.4% for the year (even including dividends), but the market itself is up 13%. 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 12% 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. Before spending more time on Elevance Health it might be wise to click here to see if insiders have been buying or selling shares.