Investors in Jazz Pharmaceuticals (NASDAQ:JAZZ) have unfortunately lost 32% over the last three years

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Jazz Pharmaceuticals plc (NASDAQ:JAZZ) shareholders have had that experience, with the share price dropping 32% in three years, versus a market return of about 16%. And the ride hasn't got any smoother in recent times over the last year, with the price 25% lower in that time. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Jazz Pharmaceuticals

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Jazz Pharmaceuticals moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.

Revenue is actually up 18% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Jazz Pharmaceuticals further; while we may be missing something on this analysis, there might also be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Jazz Pharmaceuticals is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 22% in the last year, Jazz Pharmaceuticals shareholders lost 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Jazz Pharmaceuticals better, we need to consider many other factors. For instance, we've identified 2 warning signs for Jazz Pharmaceuticals that you should be aware of.

Of course Jazz Pharmaceuticals 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.