Earnings growth outpaced the notable 22% CAGR delivered to Pennant Group (NASDAQ:PNTG) shareholders over the last three years

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, The Pennant Group, Inc. (NASDAQ:PNTG) shareholders have seen the share price rise 80% over three years, well in excess of the market return (41%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 25%.

The past week has proven to be lucrative for Pennant Group investors, so let's see if fundamentals drove the company's three-year performance.

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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...' 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.

Pennant Group was able to grow its EPS at 97% per year over three years, sending the share price higher. The average annual share price increase of 22% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

It is of course excellent to see how Pennant Group has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Pennant Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Pennant Group has rewarded shareholders with a total shareholder return of 25% in the last twelve months. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Pennant Group scores on these 3 valuation metrics.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.