Galenica's (VTX:GALE) investors will be pleased with their respectable 35% return over the last three years

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Galenica AG (VTX:GALE) share price is up 24% in the last three years, clearly besting the market decline of around 7.6% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 8.8%, including dividends.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Galenica

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. 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 the three years of share price growth, Galenica actually saw its earnings per share (EPS) drop 3.1% per year.

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Galenica at the moment. So other metrics may hold the key to understanding what is influencing investors.

We severely doubt anyone is particularly impressed with the modest 0.2% three-year revenue growth rate. So truth be told we can't see an easy explanation for the share price action, but perhaps you can...

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Galenica has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Galenica will earn in the future (free profit forecasts).

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Galenica the TSR over the last 3 years was 35%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Galenica provided a TSR of 8.8% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 7% over half a decade It is possible that returns will improve along with the business fundamentals. Before deciding if you like the current share price, check how Galenica scores on these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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