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If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) has fallen short of that second goal, with a share price rise of 54% over five years, which is below the market return. The last year has been disappointing, with the stock price down 14% in that time.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years of share price growth, Amphastar Pharmaceuticals moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Amphastar Pharmaceuticals share price has gained 6.8% in three years. During the same period, EPS grew by 34% each year. This EPS growth is higher than the 2.2% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Amphastar Pharmaceuticals has grown profits over the years, but the future is more important for shareholders. This free interactive report on Amphastar Pharmaceuticals's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market gained around 27% in the last year, Amphastar Pharmaceuticals shareholders lost 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 9.0% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Amphastar Pharmaceuticals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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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