For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Corcept Therapeutics Incorporated (NASDAQ:CORT) shares for the last five years, while they gained 368%. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 35% in about a quarter.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Corcept Therapeutics moved from a loss to profitability. 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. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Corcept Therapeutics share price has gained 122% in three years. During the same period, EPS grew by 284% each year. This EPS growth is higher than the 31% 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 image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Corcept Therapeutics's earnings, revenue and cash flow.
A Different Perspective
Corcept Therapeutics shareholders gained a total return of 3.4% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 36% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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 Corcept Therapeutics by clicking this link.
Corcept Therapeutics 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 US exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.