Halozyme Therapeutics, Inc. (NASDAQ:HALO) shareholders might be concerned after seeing the share price drop 15% in the last month. But in stark contrast, the returns over the last half decade have impressed. It's fair to say most would be happy with 189% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 27% decline over the last twelve months.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
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 the last half decade, Halozyme Therapeutics 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. Indeed, the Halozyme Therapeutics share price has gained 109% in three years. In the same period, EPS is up 109% per year. This EPS growth is higher than the 28% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Halozyme Therapeutics has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Halozyme Therapeutics' financial health with this free report on its balance sheet.
A Different Perspective
Halozyme Therapeutics shareholders are down 27% for the year, but the market itself is up 9.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 24%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 3 warning signs for Halozyme Therapeutics you should be aware of, and 1 of them is significant.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.