Avid Bioservices (NASDAQ:CDMO) jumps 12% this week, though earnings growth is still tracking behind five-year shareholder returns
Avid Bioservices, Inc. (NASDAQ:CDMO) shareholders might be concerned after seeing the share price drop 23% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 235% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. Ultimately business performance will determine whether the stock price continues the positive long term trend. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 56% drop, in the last year.
The past week has proven to be lucrative for Avid Bioservices investors, so let's see if fundamentals drove the company's five-year performance.
See our latest analysis for Avid Bioservices
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 last half decade, Avid Bioservices became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Avid Bioservices has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Avid Bioservices' financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 21% in the twelve months, Avid Bioservices shareholders did even worse, losing 56%. 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 27%, 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. It's always interesting to track share price performance over the longer term. But to understand Avid Bioservices better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Avid Bioservices you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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