Investing in ICU Medical (NASDAQ:ICUI) five years ago would have delivered you a 75% gain

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The main point of investing for the long term is to make money. Furthermore, you’d generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the ICU Medical, Inc. (NASDAQ:ICUI) share price is up 75% in the last five years, that’s less than the market return. Looking at the last year alone, the stock is up 8.2%.

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 ICU Medical

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, ICU Medical achieved compound earnings per share (EPS) growth of 4.7% per year. This EPS growth is lower than the 12% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. 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 51.10.

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

NasdaqGS:ICUI Earnings Per Share Growth January 12th 2022

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 ICU Medical’s earnings, revenue and cash flow.

A Different Perspective

ICU Medical shareholders are up 8.2% for the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 12% per year for five years. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. For instance, we’ve identified 1 warning sign for ICU Medical that you should be aware of.

But note: ICU Medical may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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.