By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at AFT Pharmaceuticals Limited (NZSE:AFT), which is up 87%, over three years, soundly beating the market return of 18% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 62% in the last year.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During three years of share price growth, AFT Pharmaceuticals moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that AFT Pharmaceuticals has improved its bottom line lately, but is it going to grow revenue? Check if analysts think AFT Pharmaceuticals will grow revenue in the future.
A Different Perspective
Pleasingly, AFT Pharmaceuticals's total shareholder return last year was 62%. That gain actually surpasses the 23% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 - AFT Pharmaceuticals has 3 warning signs (and 1 which is concerning) we think you should know about.
We will like AFT Pharmaceuticals better if we see some big insider buys. While we wait, check out this free list of growing companies 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 NZ exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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