Is the weakness in Corcept Therapeutics Incorporated (NASDAQ:CORT) stock a sign that the market could be wrong given its strong financial outlook?
It’s hard to get excited after looking at the recent performance of Corcept Therapeutics Inc (NASDAQ:CORT), as its stock is down 24% in the past month. However, stock prices are usually determined by a company’s long-term financial performance, which in this case looks quite promising. Specifically, we decided to study the ROE of Corcept Therapeutics in this article.
Return on equity or ROE is an important factor for a shareholder to consider as it tells them how much of their capital is being reinvested. In other words, it reveals the company’s success in turning shareholders’ investments into profits.
Check out our latest analysis for Corcept Therapeutics
How is ROE calculated?
the return on equity formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the formula above, the ROE for Corcept Therapeutics is:
27% = $112 million ÷ $408 million (based on trailing 12 months to March 2022).
The “yield” is the profit of the last twelve months. This means that for every dollar of shareholders’ equity, the company generated $0.27 in profit.
What is the relationship between ROE and earnings growth?
We have already established that ROE serves as an effective earnings-generating indicator for a company’s future earnings. Depending on how much of its profits the company chooses to reinvest or “keep”, we are then able to assess a company’s future ability to generate profits. Assuming all else is equal, companies that have both a higher return on equity and better earnings retention are generally the ones with a higher growth rate compared to companies that don’t. same characteristics.
A side-by-side comparison of Corcept Therapeutics earnings growth and 27% ROE
For starters, Corcept Therapeutics has a pretty high ROE which is interesting. Second, even when compared to the industry average of 17%, the company’s ROE is quite impressive. This likely paved the way for the modest 9.2% net income growth seen by Corcept Therapeutics over the past five years. growth
Next, comparing Corcept Therapeutics’ net income growth with the industry, we found that the company’s reported growth is similar to the industry average growth rate of 9.2% over the same period.
The basis for attaching value to a company is, to a large extent, linked to the growth of its profits. It is important for an investor to know whether the market has priced in the expected growth (or decline) in the company’s earnings. This will help them determine if the future of the title looks bright or ominous. Is Corcept Therapeutics correctly valued compared to other companies? These 3 assessment metrics might help you decide.
Does Corcept Therapeutics use its benefits effectively?
Corcept Therapeutics currently pays no dividends, which essentially means that it has reinvested all of its profits back into the business. This certainly contributes to the decent number of earnings growth we discussed above.
Overall, we feel Corcept Therapeutics performs quite well. In particular, we appreciate the fact that the company is reinvesting heavily in its business, and at a high rate of return. Unsurprisingly, this led to impressive earnings growth. That said, the latest forecasts from industry analysts show that the company’s earnings are set to accelerate. Are these analyst expectations based on general industry expectations or company fundamentals? Click here to access our analyst forecast page for the company.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.