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Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. For example, the Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) share price is up a whopping 567% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 34% over the last quarter.
Anyone who held for that rewarding ride would probably be keen to talk about it.
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.
During the five years of share price growth, Catalyst Pharmaceuticals 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 below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Catalyst Pharmaceuticals has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Catalyst Pharmaceuticals' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Catalyst Pharmaceuticals shareholders are up 27% for the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 46% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Catalyst Pharmaceuticals better, we need to consider many other factors. Take risks, for example - Catalyst Pharmaceuticals has 1 warning sign we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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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