The total return for Hanmi Pharm (KRX:128940) investors has risen faster than earnings growth over the last three years

Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But if you pick the right individual stocks, you could make more than that. Notably, the Hanmi Pharm. Co., Ltd. (KRX:128940) share price has gained 59% in three years, which is better than the average market return. More recently the stock has gained 7.8% in a year, which isn't too bad.

In light of the stock dropping 6.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Hanmi Pharm was able to grow its EPS at 11% per year over three years, sending the share price higher. In comparison, the 17% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.

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 Hanmi Pharm's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Hanmi Pharm shareholders gained a total return of 8.1% during the year. 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 6% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Hanmi Pharm better, we need to consider many other factors. For example, we've discovered 1 warning sign for Hanmi Pharm that you should be aware of before investing here.

Of course Hanmi Pharm may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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