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Clinigen Group plc (LON:CLIN) shareholders will doubtless be very grateful to see the share price up 37% in the last quarter. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 27% in a year, falling short of the returns you could get by investing in an index fund.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unfortunately Clinigen Group reported an EPS drop of 48% for the last year. This fall in the EPS is significantly worse than the 27% the share price fall. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 66.91, it's fair to say the market sees an EPS rebound on the cards.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Clinigen Group's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered Clinigen Group's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Clinigen Group's TSR of was a loss of 26% for the year. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We regret to report that Clinigen Group shareholders are down 26% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 12%. 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. On the bright side, long term shareholders have made money, with a gain of 2.0% per year over half a decade. 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 Clinigen Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Clinigen Group (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
Clinigen Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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. 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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