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If You Had Bought Eagle Pharmaceuticals (NASDAQ:EGRX) Stock Five Years Ago, You Could Pocket A 336% Gain Today

Simply Wall St

Eagle Pharmaceuticals, Inc. (NASDAQ:EGRX) shareholders might be concerned after seeing the share price drop 12% in the last month. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 336% higher than it was five years ago, a wonderful performance by any measure. So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price.

Check out our latest analysis for Eagle Pharmaceuticals

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 the five years of share price growth, Eagle Pharmaceuticals 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. In fact, the Eagle Pharmaceuticals stock price is 29% lower in the last three years. During the same period, EPS grew by 4.6% each year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -11% per year.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

NasdaqGM:EGRX Past and Future Earnings, December 3rd 2019

Dive deeper into Eagle Pharmaceuticals's key metrics by checking this interactive graph of Eagle Pharmaceuticals's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Eagle Pharmaceuticals shareholders have received a total shareholder return of 20% over the last year. However, that falls short of the 34% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before deciding if you like the current share price, check how Eagle Pharmaceuticals scores on these 3 valuation metrics.

We will like Eagle Pharmaceuticals better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.