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EPAM Systems (NYSE:EPAM) sheds 13% this week, as yearly returns fall more in line with earnings growth

The EPAM Systems, Inc. (NYSE:EPAM) share price has had a bad week, falling 13%. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 774%. Impressive! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term. It really delights us to see such great share price performance for investors.

In light of the stock dropping 13% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for EPAM Systems

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

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During five years of share price growth, EPAM Systems achieved compound earnings per share (EPS) growth of 30% per year. This EPS growth is lower than the 54% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 78.46.

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

earnings-per-share-growth
earnings-per-share-growth

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. This free interactive report on EPAM Systems' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that EPAM Systems shareholders have received a total shareholder return of 78% over the last year. That's better than the annualised return of 54% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that EPAM Systems is showing 1 warning sign in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.