When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But Collegium Pharmaceutical, Inc. (NASDAQ:COLL) has fallen short of that second goal, with a share price rise of 47% over five years, which is below the market return. Looking at the last year alone, the stock is up 13%.
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 last half decade, Collegium Pharmaceutical became profitable. That would generally be considered a positive, so we'd expect the share price to be up.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Collegium Pharmaceutical has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Collegium Pharmaceutical stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Collegium Pharmaceutical shareholders are up 13% for the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Collegium Pharmaceutical better, we need to consider many other factors. For instance, we've identified 2 warning signs for Collegium Pharmaceutical (1 shouldn't be ignored) that you should be aware of.
But note: Collegium Pharmaceutical 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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.