Investors in Bright Horizons Family Solutions (NYSE:BFAM) have unfortunately lost 30% over the last five years

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Bright Horizons Family Solutions Inc. (NYSE:BFAM), since the last five years saw the share price fall 30%.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Bright Horizons Family Solutions

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.

Looking back five years, both Bright Horizons Family Solutions' share price and EPS declined; the latter at a rate of 8.3% per year. The share price decline of 7% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 60.13 suggests that shareholders believe earnings will grow in the years ahead.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Bright Horizons Family Solutions has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Bright Horizons Family Solutions' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Bright Horizons Family Solutions provided a TSR of 22% over the year. That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 5% over the last five years. While 'turnarounds seldom turn' there are green shoots for Bright Horizons Family Solutions. 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. For example, we've discovered 2 warning signs for Bright Horizons Family Solutions that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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