The 3.8% return this week takes Hikma Pharmaceuticals' (LON:HIK) shareholders five-year gains to 38%

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Hikma Pharmaceuticals share price has climbed 25% in five years, easily topping the market return of 1.8% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 16% , including dividends .

The past week has proven to be lucrative for Hikma Pharmaceuticals investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Hikma Pharmaceuticals

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, Hikma Pharmaceuticals became profitable. That would generally be considered a positive, so we'd expect the share price to be up.

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

This free interactive report on Hikma Pharmaceuticals' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Hikma Pharmaceuticals, it has a TSR of 38% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Hikma Pharmaceuticals shareholders have received a total shareholder return of 16% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Hikma Pharmaceuticals better, we need to consider many other factors. Take risks, for example - Hikma Pharmaceuticals has 4 warning signs we think you should be aware of.

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 British 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.