The past three months have been tough for Amedisys, Inc. (NASDAQ: AMED), which saw the stock price drop a rather worrying 36%. But that doesn’t take away from the very good long-term returns the company generates over five years. Indeed, the share price rose an impressive 298% during this period. We believe it is more important to focus on long-term returns than on short-term returns. Ultimately, the performance of the company will determine whether the stock price continues its positive long-term trend.
Given that the stock added US $ 411 million to its market cap in the last week alone, let’s see if the underlying performance has generated any long-term returns.
To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).
Over half a decade, Amedisys has managed to increase its earnings per share to 46% per year. This EPS growth is greater than the 32% average annual increase in the share price. So it looks like the market isn’t so keen on the stock these days.
You can see below how the EPS has evolved over time (find out the exact values by clicking on the image).
NasdaqGS: AMED Growth in earnings per share October 24, 2021
We love that insiders have bought stocks in the past twelve months. Even so, future profits will be much more important to whether current shareholders make money. It might be worth taking a look at our free Amedisys profit, revenue and cash flow report.
A different perspective
While the broader market gained around 32% last year, Amedisys shareholders lost 33%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer-term investors wouldn’t be so unhappy, as they would have gained 32% each year over five years. The recent sell-off may be an opportunity, so it may be worth checking the fundamentals for signs of a long-term growth trend. It is always interesting to follow the evolution of stock prices over the long term. But to understand Amedisys better, there are many other factors to consider. Take risks, for example – Amedisys has 2 warning signs we think you should be aware.
If you like to buy stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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