The total return for CorVel (NASDAQ:CRVL) investors has risen faster than earnings growth over the last five years

By
Simply Wall St
Published
January 06, 2022
NasdaqGS:CRVL
Source: Shutterstock

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. For example, the CorVel Corporation (NASDAQ:CRVL) share price is up a whopping 427% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 11% gain in the last three months.

While the stock has fallen 5.2% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out our latest analysis for CorVel

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, CorVel managed to grow its earnings per share at 19% a year. This EPS growth is lower than the 39% 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. This optimism is visible in its fairly high P/E ratio of 59.12.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGS:CRVL Earnings Per Share Growth January 6th 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on CorVel's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that CorVel shareholders have received a total shareholder return of 81% over one year. That gain is better than the annual TSR over five years, which is 39%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for CorVel that you should be aware of.

For those who like to find winning investments this free list of growing 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 US exchanges.

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