Amdocs' (NASDAQ:DOX) earnings growth rate lags the 9.1% CAGR delivered to shareholders

Yahoo

08-04-2025

Amdocs Limited (NASDAQ:DOX) shareholders might be concerned after seeing the share price drop 10% in the last week. But the silver lining is the stock is up over five years. In that time, it is up 40%, which isn't bad, but is below the market return of 94%.
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.
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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Amdocs achieved compound earnings per share (EPS) growth of 4.1% per year. This EPS growth is slower than the share price growth of 7% per year, over the same period. 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.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Amdocs' earnings, revenue and cash flow .
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Amdocs, it has a TSR of 55% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
We regret to report that Amdocs shareholders are down 3.8% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.4%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Is Amdocs cheap compared to other companies? These 3 valuation measures might help you decide.
We will like Amdocs better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.
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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