Collegium Pharmaceutical (NASDAQ:COLL) delivers shareholders solid 28% CAGR over 5 years, surging 5.1% in the last week alone

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Collegium Pharmaceutical, Inc. (NASDAQ:COLL) shareholders would be well aware of this, since the stock is up 239% in five years. Also pleasing for shareholders was the 23% gain in the last three months.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Collegium Pharmaceutical

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 the five years of share price growth, Collegium Pharmaceutical moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Collegium Pharmaceutical share price has gained 102% in three years. During the same period, EPS grew by 0.4% each year. Notably, the EPS growth has been slower than the annualised share price gain of 26% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

The graphic below depicts how EPS has 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. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Collegium Pharmaceutical's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Collegium Pharmaceutical shareholders have received a total shareholder return of 74% over one year. That's better than the annualised return of 28% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Collegium Pharmaceutical , and understanding them should be part of your investment process.

Of course Collegium Pharmaceutical may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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