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Some Cipher Pharmaceuticals (TSE:CPH) Shareholders Have Taken A Painful 93% Share Price Drop

Simply Wall St

Cipher Pharmaceuticals Inc. (TSE:CPH) shareholders should be happy to see the share price up 29% in the last month. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 93% lower after that period. So we don't gain too much confidence from the recent recovery. The fundamental business performance will ultimately determine if the turnaround can be sustained.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for Cipher Pharmaceuticals

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over five years Cipher Pharmaceuticals's earnings per share dropped significantly, falling to a loss, with the share price also lower. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

TSX:CPH Past and Future Earnings, January 12th 2020

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in Cipher Pharmaceuticals had a tough year, with a total loss of 34%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 41% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Cipher Pharmaceuticals by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.