The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of Neuren Pharmaceuticals Limited (ASX:NEU) have suffered share price declines over the last year. To wit the share price is down 64% in that time. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 50%) in that time. Furthermore, it’s down 16% in about a quarter. That’s not much fun for holders. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Unhappily, Neuren Pharmaceuticals had to report a 13% decline in EPS over the last year. The share price decline of 64% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Neuren Pharmaceuticals has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Neuren Pharmaceuticals shareholders are down 64% for the year, but the market itself is up 9.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Before spending more time on Neuren Pharmaceuticals it might be wise to click here to see if insiders have been buying or selling shares.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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 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. Thank you for reading.