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Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. That’s what has happened with the Biogen Inc. (NASDAQ:BIIB) share price. It’s up 28% over three years, but that is below the market return. Zooming in, the stock is up a respectable 18% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During three years of share price growth, Biogen achieved compound earnings per share growth of 12% per year. The average annual share price increase of 8.5% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Biogen has improved its bottom line lately, but is it going to grow revenue? If you are thinking of buying or selling Biogen stock, you should check out this free report showing analyst revenue forecasts.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Biogen’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. Biogen hasn’t been paying dividends, but its TSR of 39% exceeds its share price return of 28%, implying it has raised capital at a discount.
A Different Perspective
It’s nice to see that Biogen shareholders have received a total shareholder return of 18% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.1% per year), it would seem that the stock’s performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Biogen scores on these 3 valuation metrics.
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 US 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 email@example.com. 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.