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Investing in UnitedHealth Group (NYSE:UNH) five years ago would have delivered you a 139% gain

It hasn't been the best quarter for UnitedHealth Group Incorporated (NYSE:UNH) shareholders, since the share price has fallen 10% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 122% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.

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

See our latest analysis for UnitedHealth Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

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During five years of share price growth, UnitedHealth Group achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is reasonably close to the 17% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

We know that UnitedHealth Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think UnitedHealth Group will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 UnitedHealth Group the TSR over the last 5 years was 139%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Although it hurts that UnitedHealth Group returned a loss of 6.0% in the last twelve months, the broader market was actually worse, returning a loss of 13%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 19% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. Before spending more time on UnitedHealth Group it might be wise to click here to see if insiders have been buying or selling shares.

We will like UnitedHealth Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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