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.
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).
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.
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