Those who invested in U.S. Physical Therapy (NYSE:USPH) five years ago are up 86%

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the U.S. Physical Therapy, Inc. (NYSE:USPH) share price is up 78% in the last five years, that's less than the market return. However, more recent buyers should be happy with the increase of 25% over 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.

View our latest analysis for U.S. Physical Therapy

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, U.S. Physical Therapy managed to grow its earnings per share at 6.5% a year. This EPS growth is lower than the 12% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 49.11.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on U.S. Physical Therapy's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for U.S. Physical Therapy the TSR over the last 5 years was 86%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

U.S. Physical Therapy shareholders are up 26% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 13% per year over five year. This suggests the company might be improving over time. 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. Take risks, for example - U.S. Physical Therapy has 1 warning sign we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

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