Stock Analysis

The one-year shareholder returns and company earnings persist lower as Catalent (NYSE:CTLT) stock falls a further 8.8% in past week

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NYSE:CTLT
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Investing in stocks comes with the risk that the share price will fall. And there's no doubt that Catalent, Inc. (NYSE:CTLT) stock has had a really bad year. In that relatively short period, the share price has plunged 66%. At least the damage isn't so bad if you look at the last three years, since the stock is down 17% in that time. Shareholders have had an even rougher run lately, with the share price down 58% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 8.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out the opportunities and risks within the US Pharmaceuticals industry.

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Unfortunately Catalent reported an EPS drop of 27% for the last year. The share price decline of 66% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NYSE:CTLT Earnings Per Share Growth November 21st 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We regret to report that Catalent shareholders are down 66% for the year. Unfortunately, that's worse than the broader market decline of 21%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 1.7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 4 warning signs with Catalent (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

Valuation is complex, but we're helping make it simple.

Find out whether Catalent is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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