Yahoo Finance Earnings are growing at Penumbra (NYSE:PEN) but shareholders still don't like its prospects
It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Penumbra, Inc. (NYSE:PEN) have tasted that bitter downside in the last year, as the share price dropped 38%. That falls noticeably short of the market return of around 28%. At least the damage isn't so bad if you look at the last three years, since the stock is down 23% in that time. The falls have accelerated recently, with the share price down 16% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
With the stock having lost 3.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for Penumbra
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. 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.
Penumbra stole the show with its EPS rocketing, in the last year. The rate of growth may not be sustainable, but it is still really positive. As you can imagine, the share price action therefore perturbs us. Some different data might shed some more light on the situation.
Penumbra managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
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's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Penumbra stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Penumbra shareholders are down 38% for the year, but the market itself is up 28%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Penumbra you might want to consider these 3 valuation metrics.
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 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.
