Catalent (NYSE:CTLT) stock performs better than its underlying earnings growth over last five years
It might be of some concern to shareholders to see the Catalent, Inc. (NYSE:CTLT) share price down 11% in the last month. But in stark contrast, the returns over the last half decade have impressed. Indeed, the share price is up an impressive 207% in that time. 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.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
See our latest analysis for Catalent
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Catalent achieved compound earnings per share (EPS) growth of 26% per year. That makes the EPS growth particularly close to the yearly share price growth of 25%. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Catalent has grown profits over the years, but the future is more important for shareholders. This free interactive report on Catalent's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
The total return of 8.1% received by Catalent shareholders over the last year isn't far from the market return of -8.4%. Longer term investors wouldn't be so upset, since they would have made 25%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand Catalent better, we need to consider many other factors. For instance, we've identified 2 warning signs for Catalent (1 is significant) that you should be aware of.
We will like Catalent better if we see some big insider buys. While we wait, check out this free list of growing companies 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 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.
