Tenet Healthcare (NYSE:THC) shareholder returns have been enviable, earning 496% in 5 years

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. To wit, the Tenet Healthcare Corporation (NYSE:THC) share price has soared 496% over five years. If that doesn't get you thinking about long term investing, we don't know what will. And in the last week the share price has popped 4.3%. But this could be related to the buoyant market which is up about 6.8% in a week.

The past week has proven to be lucrative for Tenet Healthcare investors, so let's see if fundamentals drove the company's five-year performance.

We've discovered 4 warning signs about Tenet Healthcare. View them for free.

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...' 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.

During the last half decade, Tenet Healthcare became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Tenet Healthcare share price is up 48% in the last three years. In the same period, EPS is up 58% per year. This EPS growth is higher than the 14% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 3.71.

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

It is of course excellent to see how Tenet Healthcare has grown profits over the years, but the future is more important for shareholders. This free interactive report on Tenet Healthcare's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Tenet Healthcare has rewarded shareholders with a total shareholder return of 26% in the last twelve months. However, that falls short of the 43% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Tenet Healthcare has 4 warning signs (and 2 which make us uncomfortable) we think 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 American exchanges.

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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.