Those who invested in Labcorp Holdings (NYSE:LH) five years ago are up 70%

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Labcorp Holdings Inc. (NYSE:LH) share price is up 41% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 9.2%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Labcorp Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Labcorp Holdings actually saw its EPS drop 7.4% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 1.2% dividend yield is unlikely to be propping up the share price. It is not great to see that revenue has dropped by 0.6% per year over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Labcorp Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Labcorp Holdings in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Labcorp Holdings' TSR for the last 5 years was 70%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Labcorp Holdings provided a TSR of 11% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 11% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 Labcorp Holdings that you should be aware of before investing here.

Of course Labcorp Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.