QuidelOrtho (NASDAQ:QDEL) pulls back 4.3% this week, but still delivers shareholders favorable 14% CAGR over 5 years
Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, the QuidelOrtho Corporation (NASDAQ:QDEL) share price is up 94% in the last 5 years, clearly besting the market return of around 45% (ignoring dividends).
While the stock has fallen 4.3% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
See our latest analysis for QuidelOrtho
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last half decade, QuidelOrtho became profitable. That would generally be considered a positive, so we'd expect the share price to be up. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the QuidelOrtho share price has gained 8.3% in three years. During the same period, EPS grew by 88% each year. This EPS growth is higher than the 2.7% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.14.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how QuidelOrtho has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While it's certainly disappointing to see that QuidelOrtho shares lost 8.2% throughout the year, that wasn't as bad as the market loss of 9.4%. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - QuidelOrtho has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.
But note: QuidelOrtho 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.
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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.
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