Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that’s been the case for longer term Myriad Genetics, Inc. (NASDAQ:MYGN) shareholders, since the share price is down 19% in the last three years, falling well short of the market return of around 48%. It’s down 1.5% in the last seven days.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the three years that the share price fell, Myriad Genetics’s earnings per share (EPS) dropped by 41% each year. This fall in the EPS is worse than the 6.8% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment — or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 92.29.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Myriad Genetics’s earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 1.4% in the last year, Myriad Genetics shareholders lost 9.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3.1% 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 deciding if you like the current share price, check how Myriad Genetics scores on these 3 valuation metrics.
We will like Myriad Genetics better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 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.