By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, the Neuren Pharmaceuticals Limited (ASX:NEU) share price is up 43% in the last three years, clearly besting than the market return of around 15% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 17%.
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 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).
Neuren Pharmaceuticals became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Neuren Pharmaceuticals has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Neuren Pharmaceuticals stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that Neuren Pharmaceuticals has rewarded shareholders with a total shareholder return of 17% in the last twelve months. That certainly beats the loss of about 6.9% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. If you would like to research Neuren Pharmaceuticals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Neuren Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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 firstname.lastname@example.org. 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.