Corcept Therapeutics Incorporated (NASDAQ:CORT) shareholders might be concerned after seeing the share price drop 23% in the last month. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 88% in that time.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years of share price growth, Corcept Therapeutics moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price. 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. We can see that the Corcept Therapeutics share price is down 6.2% in the last three years. During the same period, EPS grew by 124% each year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -2.1% per year.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Corcept Therapeutics has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Corcept Therapeutics's financial health with this free report on its balance sheet.
A Different Perspective
While it's never nice to take a loss, Corcept Therapeutics shareholders can take comfort that their trailing twelve month loss of 6.8% wasn't as bad as the market loss of around 11%. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Corcept Therapeutics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Corcept Therapeutics , and understanding them should be part of your investment process.
But note: Corcept Therapeutics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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