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The total return for EPAM Systems (NYSE:EPAM) investors has risen faster than earnings growth over the last five years

EPAM Systems, Inc. (NYSE:EPAM) shareholders might understandably be very concerned that the share price has dropped 36% in the last quarter. Looking further back, the stock has generated good profits over five years. Its return of 82% has certainly bested the market return!

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for EPAM Systems

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, EPAM Systems achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is higher than the 13% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of EPAM Systems' earnings, revenue and cash flow.

A Different Perspective

Investors in EPAM Systems had a tough year, with a total loss of 28%, against a market gain of about 2.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on EPAM Systems it might be wise to click here to see if insiders have been buying or selling shares.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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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