When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) stock is up an impressive 132% over the last five years. It's also good to see the share price up 20% over the last quarter. But this could be related to the strong market, which is up 18% in the last three months.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Vertex Pharmaceuticals
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.
Over half a decade, Vertex Pharmaceuticals managed to grow its earnings per share at 39% a year. The EPS growth is more impressive than the yearly share price gain of 18% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Vertex Pharmaceuticals' 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 Vertex Pharmaceuticals shareholders have received a total shareholder return of 36% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before deciding if you like the current share price, check how Vertex Pharmaceuticals scores on these 3 valuation metrics.
But note: Vertex Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.