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Shareholders in Vanda Pharmaceuticals (NASDAQ:VNDA) are in the red if they invested five years ago

·3 min read

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), since the last five years saw the share price fall 40%. And some of the more recent buyers are probably worried, too, with the stock falling 38% in the last year.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Vanda Pharmaceuticals

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Vanda Pharmaceuticals became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

In contrast to the share price, revenue has actually increased by 11% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

Take a more thorough look at Vanda Pharmaceuticals' financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Vanda Pharmaceuticals shareholders are down 38% for the year. Unfortunately, that's worse than the broader market decline of 18%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. We realise that Baron Rothschild 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 business. It's always interesting to track share price performance over the longer term. But to understand Vanda Pharmaceuticals better, we need to consider many other factors. Take risks, for example - Vanda Pharmaceuticals has 2 warning signs we think you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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