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Is PRA Health Sciences's (NASDAQ:PRAH) 142% Share Price Increase Well Justified?

Simply Wall St

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It hasn't been the best quarter for PRA Health Sciences, Inc. (NASDAQ:PRAH) shareholders, since the share price has fallen 11% in that time. But that doesn't change the fact that the returns over the last three years have been very strong. The share price marched upwards over that time, and is now 142% higher than it was. 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.

See our latest analysis for PRA Health Sciences

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, PRA Health Sciences achieved compound earnings per share growth of 45% per year. The average annual share price increase of 34% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

NasdaqGS:PRAH Past and Future Earnings, July 2nd 2019

It is of course excellent to see how PRA Health Sciences 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

Over the last year PRA Health Sciences shareholders have received a TSR of 4.9%. Unfortunately this falls short of the market return of around 8.4%. But the (superior) three-year TSR of 34% per year is some consolation. Even the best companies don't see strong share price performance every year. Is PRA Health Sciences cheap compared to other companies? These 3 valuation measures might help you decide.

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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.