By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Dynavax Technologies Corporation (NASDAQ:DVAX) share price is up 38% in the last three years, clearly besting the market return of around 13% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 15%.
Since the long term performance has been good but there's been a recent pullback of 8.6%, let's check if the fundamentals match the share price.
See our latest analysis for Dynavax Technologies
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Dynavax Technologies became profitable within the last three years. So we would expect a higher share price over the period.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Dynavax Technologies has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Dynavax Technologies' financial health with this free report on its balance sheet.
A Different Perspective
Dynavax Technologies shareholders gained a total return of 15% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with Dynavax Technologies .
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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.