AFT Pharmaceuticals (NZSE:AFT) rallies 10% this week, taking five-year gains to 62%

While AFT Pharmaceuticals Limited (NZSE:AFT) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 11% in the last quarter. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 61% in that time.

Since the stock has added NZ$30m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for AFT Pharmaceuticals

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, AFT Pharmaceuticals moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the AFT Pharmaceuticals share price is down 29% in the last three years. Meanwhile, EPS is up 55% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -11% per year.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that AFT Pharmaceuticals has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on AFT Pharmaceuticals' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

AFT Pharmaceuticals shareholders are down 7.7% for the year (even including dividends), but the market itself is up 2.0%. 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 10% 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. It's always interesting to track share price performance over the longer term. But to understand AFT Pharmaceuticals better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with AFT Pharmaceuticals .

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 New Zealander 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.