The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Puma Biotechnology, Inc. (NASDAQ:PBYI) share price is 93% higher than it was a year ago, much better than the market return of around 26% (not including dividends) in the same period. That's a solid performance by our standards! Zooming out, the stock is actually down 41% in the last three years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Puma Biotechnology

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Puma Biotechnology went from making a loss to reporting a profit, in the last year.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

We think that the revenue growth of 3.3% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

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

It is of course excellent to see how Puma Biotechnology has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that Puma Biotechnology shareholders have received a total shareholder return of 93% over the last year. Notably the five-year annualised TSR loss of 13% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 3 warning signs with Puma Biotechnology (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

We will like Puma Biotechnology better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.