While it may not be enough for some shareholders, we think it is good to see the Vifor Pharma AG (VTX:VIFN) share price up 13% in a single quarter. But that doesn’t help the fact that the three year return is less impressive. In fact, the share price is down 16% in the last three years, falling well short of the market return.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate three years of share price decline, Vifor Pharma actually saw its earnings per share (EPS) improve by 60% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
The modest 1.5% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 10% over the three years, so the share price drop doesn’t seem to hinge on revenue, either. It’s probably worth investigating Vifor Pharma further; while we may be missing something on this analysis, there might also be an opportunity.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Vifor Pharma is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Vifor Pharma in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Vifor Pharma’s TSR for the last 3 years was -12%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Investors in Vifor Pharma had a tough year, with a total loss of 8.6% (including dividends), against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 1.7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Vifor Pharma better, we need to consider many other factors. Even so, be aware that Vifor Pharma is showing 1 warning sign in our investment analysis , you should know about…
We will like Vifor Pharma 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 CH exchanges.
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This article by Simply Wall St is general in nature. 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.
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