Ironwood Pharmaceuticals'(NASDAQ:IRWD) Share Price Is Down 32% Over The Past Three Years.
This week we saw the Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) share price climb by 10%. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 32% in the last three years, falling well short of the market return.
View our latest analysis for Ironwood Pharmaceuticals
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Ironwood Pharmaceuticals moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.
Revenue is actually up 18% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Ironwood Pharmaceuticals more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Ironwood Pharmaceuticals has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Ironwood Pharmaceuticals' total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Ironwood Pharmaceuticals' TSR, at -21% is higher than its share price return of -32%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Ironwood Pharmaceuticals shareholders gained a total return of 6.7% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 0.3% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Ironwood Pharmaceuticals better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Ironwood Pharmaceuticals you should be aware of.
But note: Ironwood Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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