Despite shrinking by US$72m in the past week, Dynavax Technologies (NASDAQ:DVAX) shareholders are still up 116% over 3 years
The last three months have been tough on Dynavax Technologies Corporation (NASDAQ:DVAX) shareholders, who have seen the share price decline a rather worrying 30%. But that doesn't change the fact that the returns over the last three years have been very strong. The share price marched upwards over that time, and is now 116% higher than it was. It's not uncommon to see a share price retrace a bit, after a big gain. The thing to consider is whether the underlying business is doing well enough to support the current price.
Although Dynavax Technologies has shed US$72m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See our latest analysis for Dynavax Technologies
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, Dynavax Technologies moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Dynavax Technologies has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Dynavax Technologies' financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that Dynavax Technologies shareholders are down 45% for the year. Unfortunately, that's worse than the broader market decline of 24%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Dynavax Technologies has 2 warning signs (and 1 which is concerning) we think you should know about.
Of course Dynavax Technologies may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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