Catalyst Pharmaceuticals' (NASDAQ:CPRX) earnings growth rate lags the 37% CAGR delivered to shareholders

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) shares for the last five years, while they gained 376%. If that doesn't get you thinking about long term investing, we don't know what will. On the other hand, we note it's down 8.3% in about a month. This could be related to the soft market, with stocks down around 2.4% in the last month.

Although Catalyst Pharmaceuticals has shed US$105m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Catalyst 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 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.

Over half a decade, Catalyst Pharmaceuticals managed to grow its earnings per share at 67% a year. This EPS growth is higher than the 37% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Catalyst Pharmaceuticals has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Catalyst Pharmaceuticals' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Catalyst Pharmaceuticals has rewarded shareholders with a total shareholder return of 34% in the last twelve months. Having said that, the five-year TSR of 37% a year, is even better. Before spending more time on Catalyst Pharmaceuticals it might be wise to click here to see if insiders have been buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.