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Can You Imagine How Chuffed Arena Pharmaceuticals's (NASDAQ:ARNA) Shareholders Feel About Its 189% Share Price Gain?

Simply Wall St

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) shareholders might be concerned after seeing the share price drop 12% in the last quarter. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 189% in that time. To some, the recent share price pullback wouldn't be surprising after such a good run. Only time will tell if there is still too much optimism currently reflected in the share price.

Check out our latest analysis for Arena 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.

Arena Pharmaceuticals became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

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

NasdaqGS:ARNA Past and Future Earnings, November 10th 2019

It is of course excellent to see how Arena Pharmaceuticals has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Arena Pharmaceuticals has rewarded shareholders with a total shareholder return of 31% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.9% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Arena Pharmaceuticals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

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. Thank you for reading.