Teva Pharmaceutical Industries (NYSE:TEVA) earnings and shareholder returns have been trending downwards for the last five years, but the stock lifts 3.6% this past week
Teva Pharmaceutical Industries Limited (NYSE:TEVA) shareholders should be happy to see the share price up 12% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. In fact, the share price has tumbled down a mountain to land 72% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The fundamental business performance will ultimately determine if the turnaround can be sustained.
While the stock has risen 3.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
View our latest analysis for Teva Pharmaceutical Industries
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Teva Pharmaceutical Industries moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
Arguably, the revenue drop of 8.1% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Teva Pharmaceutical Industries is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Teva Pharmaceutical Industries stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Teva Pharmaceutical Industries shareholders are down 23% for the year, but the market itself is up 15%. 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 11% over the last half decade. 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. 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 Teva Pharmaceutical Industries (1 is a bit concerning!) that you should be aware of before investing here.
Of course Teva Pharmaceutical Industries may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.
