For a lot of people, the main goal of investing is to make more money than what the entire market achieves. However, even someone who’s really good at picking stocks will only have some of their choices turn out successful. Right now, some people who invested in Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) might be questioning their decision, as the past five years have seen the company’s stock price drop by 41%. Moreover, it has also gone down by 15% in just about three months. This isn’t very enjoyable for the people who own these shares.
Although the stock has gone up by 4.7% in the last week, the people who have been shareholders for a long time are still facing losses. Let’s take a look at the company’s fundamental information to understand more.
To put it in simpler terms like Benjamin Graham suggested, in the short term, the stock market acts like a voting machine where people’s opinions matter, but in the long term, it works like a weighing machine that focuses on actual value. One way to understand how people’s feelings about a company have changed is to compare its earnings per share (EPS) with its stock price.
If we look back over the last five years, both the share price and EPS of Supernus Pharmaceuticals went down. The EPS went down by around 7.8% each year. It’s important to notice that the share price fell faster than the EPS, at a rate of about 10% per year during that period. This suggests that before, the market might have been too hopeful about the stock’s potential.
You can see the company’s earnings per share over time in the picture below.
A Different Perspective
While the overall market went up by about 12% in the past year, those who invested in Supernus Pharmaceuticals saw a decrease of 0.8% in their shares. Remember, even the best stocks can sometimes perform worse than the market within a twelve-month timeframe. However, the loss in the past year isn’t as significant as the 7% yearly loss that investors experienced over the last five years. For us to feel more positive, there would need to be consistent improvements in the important measures of the company. I find it really interesting to use the long-term trend of share prices as an indicator of how well a business is doing. But, to truly understand the situation, we need to consider other information as well. For example, we should think about risks – in this case, Supernus Pharmaceuticals has a warning sign that we believe you should be aware of.