Abbott Laboratories' (NYSE:ABT) earnings growth rate lags the 15% CAGR delivered to shareholders

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But Abbott Laboratories (NYSE:ABT) has fallen short of that second goal, with a share price rise of 86% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 9.7%.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Abbott Laboratories

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.

During five years of share price growth, Abbott Laboratories achieved compound earnings per share (EPS) growth of 30% per year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. So it seems the market isn't so enthusiastic 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 Abbott Laboratories has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Abbott Laboratories will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Abbott Laboratories, it has a TSR of 104% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Abbott Laboratories provided a TSR of 12% over the year (including dividends). That's fairly close to the broader market return. We should note here that the five-year TSR is more impressive, at 15% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Abbott Laboratories a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Abbott Laboratories better, we need to consider many other factors. For instance, we've identified 1 warning sign for Abbott Laboratories that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.