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Innoviva's (NASDAQ:INVA) investors will be pleased with their 29% return over the last three years

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Innoviva, Inc. (NASDAQ:INVA), which is up 29%, over three years, soundly beating the market return of 15% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 21% in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Innoviva

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).

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Over the last three years, Innoviva failed to grow earnings per share, which fell 29% (annualized).

So we doubt that the market is looking to EPS for its main judge of the company's value. Given this situation, it makes sense to look at other metrics too.

The revenue drop of 3.9% is as underwhelming as some politicians. What's clear is that historic earnings and revenue aren't matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Innoviva in this interactive graph of future profit estimates.

A Different Perspective

Innoviva shareholders gained a total return of 21% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 2% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Innoviva better, we need to consider many other factors. Take risks, for example - Innoviva has 5 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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