Investors in Alcon (VTX:ALC) have seen notable returns of 45% over the past five years

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Alcon share price has climbed 44% in five years, easily topping the market return of 15% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 3.3%, including dividends.

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.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the five years of share price growth, Alcon moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Alcon share price is up 2.0% in the last three years. In the same period, EPS is up 39% per year. This EPS growth is higher than the 0.7% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Alcon has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Alcon stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Alcon provided a TSR of 3.3% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 8% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Is Alcon cheap compared to other companies? These 3 valuation measures might help you decide.

We will like Alcon better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.