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Clinuvel Pharmaceuticals (ASX:CUV) shareholders have endured a 50% loss from investing in the stock three years ago

Investing in stocks inevitably means buying into some companies that perform poorly. Long term Clinuvel Pharmaceuticals Limited (ASX:CUV) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 50% drop in the share price over that period. And over the last year the share price fell 25%, so we doubt many shareholders are delighted. More recently, the share price has dropped a further 13% in a month.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Clinuvel Pharmaceuticals

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

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Although the share price is down over three years, Clinuvel Pharmaceuticals actually managed to grow EPS by 12% per year in that time. 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). Alternatively, growth expectations may have been unreasonable in the past.

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.

With a rather small yield of just 0.4% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 23% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Clinuvel Pharmaceuticals more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

We know that Clinuvel Pharmaceuticals has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Clinuvel Pharmaceuticals will earn in the future (free profit forecasts).

A Different Perspective

Clinuvel Pharmaceuticals shareholders are down 24% for the year (even including dividends), but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. Before spending more time on Clinuvel Pharmaceuticals it might be wise to click here to see if insiders have been buying or selling shares.

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 Australian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.