If you want to increase your wealth in the stock market, you can do so by buying an index fund. But in our experience, buying the right stocks can significantly increase your wealth. For example, on Laboratory Corporation of America Holdings (NYSE: LH ) share price has risen 41% over the past five years, slightly outpacing the market’s return. Zooming in, the stock is actually down 25% over the past year.
Let’s take a look at the key fundamentals over the long term and see if they align with shareholder returns.
Check out our latest analysis for Laboratory Corporation of America Holdings
While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying business performance. One way to examine 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).
During five years of stock price growth, Laboratory Corporation of America Holdings achieved compound earnings per share (EPS) growth of 23% annually. EPS growth is more impressive than the stock’s 7% year-over-year increase over the same period. Therefore, it seems that the market has become relatively pessimistic about the company. This cautious view is reflected in its (relatively low) P/E ratio of 11.44.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like insiders buying shares over the past twelve months. Having said that, most people think that earnings and revenue growth trends are a more meaningful guide for a business. Before buying or selling a stock, we always recommend a careful study of the historical growth trends available here.
A different point of view
While the broader market lost about 21% over the twelve months, Laboratory Corporation of America Holdings shareholders fared even worse, losing 25% (even including dividends). However, the share price may simply have been affected by wider market fluctuations. Might be worth keeping an eye on the basics in case there’s a good opportunity. On the plus side, long-term shareholders have made money with a 7% annual return for half a decade. A recent selloff may be a possibility, so it may be worth checking the fundamentals for signs of a longer-term uptrend. While it’s worth considering the various effects that market conditions can have on a stock’s price, there are other factors that are even more important. For this you need to learn about 3 warning signs we noticed with Laboratory Corporation of America Holdings (including 1 which is significant) .
If you enjoy buying stocks along with management, then this might just appeal to you Free of charge list of companies. (Hint: insiders buy them).
Please note that the market returns quoted in this article reflect the weighted average market returns of stocks currently trading on US exchanges.
What are the risks and opportunities for Laboratory Corporation of America Holdings?
Laboratory Corporation of America Holdings operates as a global life sciences company that provides vital information to help physicians, hospitals, pharmaceutical companies, researchers and patients make clear and confident decisions.
See the full analysis
It is trading 24.6% below our estimate of its fair value
Earnings are forecast to decline by an average of 0.06% per year over the next 3 years
Profit margins (11.5%) are lower than last year (16.7%)
There is a high level of debt
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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts, using only an 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. We aim to provide you with long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.