We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example, after five long years the PDL BioPharma, Inc. (NASDAQ:PDLI) share price is a whole 68% lower. That is extremely sub-optimal, to say the least. The falls have accelerated recently, with the share price down 17% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
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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).
Over five years PDL BioPharma's earnings per share dropped significantly, falling to a loss, with the share price also lower. At present it's hard to make valid comparisons between EPS and the share price. However, we can say we'd expect to see a falling share price in this scenario.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on PDL BioPharma's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Dividend Lost
The share price return figures discussed above don't include the value of dividends paid previously, but the total shareholder return (TSR) does. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. Over the last 5 years, PDL BioPharma generated a TSR of -61%, which is, of course, better than the share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.
A Different Perspective
We're pleased to report that PDL BioPharma shareholders have received a total shareholder return of 8.7% over one year. There's no doubt those recent returns are much better than the TSR loss of 17% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course PDL BioPharma 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 firstname.lastname@example.org. 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.