It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Exelixis, Inc. (NASDAQ:EXEL) share price is 102% higher than it was three years ago. That sort of return is as solid as granite. In contrast, the stock has fallen 8.8% in the last 30 days.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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.

During three years of share price growth, Exelixis achieved compound earnings per share growth of 36% per year. The average annual share price increase of 26% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Exelixis has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Exelixis' financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Exelixis shareholders have received a total shareholder return of 89% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. 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. To that end, you should be aware of the 1 warning sign we've spotted with Exelixis .

We will like Exelixis better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

—

Weekly Picks from Community

Investing narratives with Fair Values

• Vita Life Sciences Set for a 12.72% Revenue Growth While Tackling Operational Challenges
  By Robbo – Community Contributor

  Fair Value Estimated:
  A$2.42 · 0.1% Overvalued
  

  
  
• Vossloh rides a €500 billion wave to boost growth and earnings in the next decade
  By Chris1 – Community Contributor

  Fair Value Estimated:
  €78.41 · 0.1% Overvalued
  

  
  
• Intuitive Surgical Will Transform Healthcare with 12% Revenue Growth
  By Unike – Community Contributor

  Fair Value Estimated:
  $325.55 · 0.6% Undervalued
  

  
  

View more featured narratives

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.