Those who invested in Universal Health Services (NYSE:UHS) five years ago are up 86%

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 Universal Health Services, Inc. (NYSE:UHS) has fallen short of that second goal, with a share price rise of 82% over five years, which is below the market return. Zooming in, the stock is up just 3.1% in the last year.

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

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Universal Health Services achieved compound earnings per share (EPS) growth of 18% per year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 10.11 also suggests market apprehension.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Universal Health Services has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Universal Health Services the TSR over the last 5 years was 86%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Universal Health Services shareholders gained a total return of 3.5% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 13% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Universal Health Services better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Universal Health Services .

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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.