Incyte (NASDAQ:INCY) shareholders have earned a 24% return over the last year

We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the Incyte Corporation (NASDAQ:INCY) share price is up 24% in the last year, that falls short of the market return. In contrast, the longer term returns are negative, since the share price is 2.9% lower than it was three years ago.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Incyte

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 last year, Incyte actually saw its earnings per share drop 73%.

Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

However the year on year revenue growth of 9.8% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Incyte is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Incyte shareholders gained a total return of 24% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 4% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Incyte better, we need to consider many other factors. Take risks, for example - Incyte has 3 warning signs we think you should be aware of.

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 American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.