It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Harrow Health, Inc. (NASDAQ:HROW) share price has soared 256% in the last three years. That sort of return is as solid as granite. And in the last month, the share price has gained 4.3%.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Harrow Health became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Harrow Health has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Harrow Health's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Harrow Health provided a TSR of 9.4% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 5.2% endured over half a decade. So this might be a sign the business has turned its fortunes around. Is Harrow Health cheap compared to other companies? These 3 valuation measures might help you decide.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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 email@example.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.
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