Does Universal Health Services' (NYSE:UHS) Share Price Gain of 17% Match Its Business Performance?

By
Simply Wall St
Published
March 09, 2021
NYSE:UHS

On average, over time, stock markets tend to rise higher. This makes investing attractive. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the Universal Health Services, Inc. (NYSE:UHS) share price is up 17% in the last year, that falls short of the market return. However, the longer term returns haven't been so impressive, with the stock up just 6.6% in the last three years.

See our latest analysis for Universal Health Services

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the last year Universal Health Services grew its earnings per share (EPS) by 21%. It's fair to say that the share price gain of 17% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Universal Health Services as it was before. This could be an opportunity.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NYSE:UHS Earnings Per Share Growth March 9th 2021

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Universal Health Services' earnings, revenue and cash flow.

A Different Perspective

Universal Health Services shareholders are up 17% for the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Universal Health Services you should know about.

Of course Universal Health Services 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 US exchanges.

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This article by Simply Wall St is general in nature. 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.
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