CellaVision (STO:CEVI) stock performs better than its underlying earnings growth over last year

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the CellaVision AB (publ) (STO:CEVI) share price is up 94% in the last 1 year, clearly besting the market return of around 25% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 25% in three years.

Since it's been a strong week for CellaVision shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for CellaVision

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

CellaVision was able to grow EPS by 50% in the last twelve months. The share price gain of 94% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago. The fairly generous P/E ratio of 48.42 also points to this optimism.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that CellaVision has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It's good to see that CellaVision has rewarded shareholders with a total shareholder return of 96% in the last twelve months. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 3% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand CellaVision better, we need to consider many other factors. Take risks, for example - CellaVision has 1 warning sign we think you should be aware of.

But note: CellaVision 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 Swedish 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.