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Is Ligand Pharmaceuticals' (NASDAQ:LGND) Share Price Gain Of 101% Well Earned?

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Simply Wall St
·3 min read
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) shareholders would be well aware of this, since the stock is up 101% in five years. Better yet, the share price has gained 102% in the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

View our latest analysis for Ligand Pharmaceuticals

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 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 five years of share price growth, Ligand Pharmaceuticals achieved compound earnings per share (EPS) growth of 21% per year. The EPS growth is more impressive than the yearly share price gain of 15% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
earnings-per-share-growth

Dive deeper into Ligand Pharmaceuticals' key metrics by checking this interactive graph of Ligand Pharmaceuticals's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Ligand Pharmaceuticals shareholders have received a total shareholder return of 93% over one year. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Ligand Pharmaceuticals (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.