The 35% return delivered to Biogen's (NASDAQ:BIIB) shareholders actually lagged YoY earnings growth

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. To wit, the Biogen Inc. (NASDAQ:BIIB) share price is 35% higher than it was a year ago, much better than the market decline of around 11% (not including dividends) in the same period. So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 10% lower than it was three years ago.

The past week has proven to be lucrative for Biogen investors, so let's see if fundamentals drove the company's one-year performance.

View our latest analysis for Biogen

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During the last year Biogen grew its earnings per share (EPS) by 101%. It's fair to say that the share price gain of 35% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Biogen as it was before. This could be an opportunity.

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

We know that Biogen has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Biogen will grow revenue in the future.

A Different Perspective

We're pleased to report that Biogen shareholders have received a total shareholder return of 35% over one year. That gain is better than the annual TSR over five years, which is 1.3%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Biogen (1 is concerning) that you should be aware of.

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.

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