Tenet Healthcare Corporation (NYSE:THC) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that does not change the realty that the stock’s performance has been terrific, over five years. In fact, during that period, the share price climbed 321%. Impressive! Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

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 Tenet Healthcare

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 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).

During the five years of share price growth, Tenet Healthcare moved from a loss to profitability. 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 72% in the last three years. In the same period, EPS is up 48% per year. This EPS growth is higher than the 20% 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 4.27.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Tenet Healthcare has improved its bottom line over the last three years, but what does the future have in store? 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.

We’re pleased to report that Tenet Healthcare shareholders have received a total shareholder return of 59% over one year. That’s better than the annualised return of 33% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. To that end, you should learn about the 3 warning signs we’ve spotted with Tenet Healthcare (including 1 which shouldn’t be ignored) .