Estia Health (ASX:EHE) shareholders are up 12% this past week, but still in the red over the last five years

Estia Health Limited (ASX:EHE) shareholders should be happy to see the share price up 16% in the last month. But over the last half decade, the stock has not performed well. In fact, the share price is down 39%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added AU$62m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Our analysis indicates that EHE is potentially undervalued!

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.

In the last half decade Estia Health saw its share price fall as its EPS declined below zero. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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 Estia Health the TSR over the last 5 years was -28%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Estia Health shareholders have received a total shareholder return of 8.3% over the last year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 5% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

But note: Estia Health may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.