When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Avantor, Inc. (NYSE:AVTR) share price is up 61% in the last five years, that's less than the market return. On a brighter note, more newer shareholders are probably rather content with the 22% share price gain over twelve months.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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. 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 five years of share price growth, Avantor moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. In fact, the Avantor stock price is 20% lower in the last three years. During the same period, EPS grew by 9.4% each year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -7% per year.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Avantor provided a TSR of 22% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Avantor better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Avantor you should be aware of, and 1 of them shouldn't be ignored.

Of course Avantor may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.