Those who invested in Tenet Healthcare (NYSE:THC) five years ago are up 660%

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. To wit, the Tenet Healthcare Corporation (NYSE:THC) share price has soared 660% over five years. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 25% over the last quarter. It really delights us to see such great share price performance for investors.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for Tenet Healthcare

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Tenet Healthcare moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Tenet Healthcare share price is up 141% in the last three years. During the same period, EPS grew by 91% each year. This EPS growth is higher than the 34% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 5.84.

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

A Different Perspective

It's nice to see that Tenet Healthcare shareholders have received a total shareholder return of 143% over the last year. That gain is better than the annual TSR over five years, which is 50%. 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. 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 example, we've discovered 4 warning signs for Tenet Healthcare (1 is potentially serious!) that you should be aware of before investing here.

Of course Tenet Healthcare 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.