CytomX Therapeutics' (NASDAQ:CTMX) earnings growth rate lags the 256% return delivered to shareholders

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the CytomX Therapeutics, Inc. (NASDAQ:CTMX) share price has soared 256% in the last 1 year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 96% over the last quarter. It is also impressive that the stock is up 150% over three years, adding to the sense that it is a real winner.

While the stock has fallen 7.4% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 CytomX Therapeutics grew its earnings per share (EPS) by 44%. The share price gain of 256% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of CytomX Therapeutics' earnings, revenue and cash flow.

A Different Perspective

It's nice to see that CytomX Therapeutics shareholders have received a total shareholder return of 256% over the last year. There's no doubt those recent returns are much better than the TSR loss of 8% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. For instance, we've identified 3 warning signs for CytomX Therapeutics (2 shouldn't be ignored) 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.