There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. For example, the Anika Therapeutics, Inc. (NASDAQ:ANIK), share price is up over the last year, but its gain of 22% trails the market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 10% in three years.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last year Anika Therapeutics saw its earnings per share (EPS) drop below zero. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. We might get a clue to explain the share price move by looking to other metrics.
However the year on year revenue growth of 14% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
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 Anika Therapeutics in this interactive graph of future profit estimates.
A Different Perspective
Anika Therapeutics shareholders are up 22% for the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 1.8% per year, over five years. So this might be a sign the business has turned its fortunes around. Before spending more time on Anika Therapeutics it might be wise to click here to see if insiders have been buying or selling shares.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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. 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.
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