Investors in Amneal Pharmaceuticals (NASDAQ:AMRX) have seen splendid returns of 194% over the past five years

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) share price has soared 194% in the last half decade. Most would be very happy with that. On top of that, the share price is up 31% in about a quarter.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Amneal Pharmaceuticals

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. 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.

We know that Amneal Pharmaceuticals has been profitable in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So it might be better to look at other metrics to try to understand the share price.

In contrast revenue growth of 8.1% per year is probably viewed as evidence that Amneal Pharmaceuticals is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Amneal Pharmaceuticals stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

It's good to see that Amneal Pharmaceuticals has rewarded shareholders with a total shareholder return of 104% in the last twelve months. That gain is better than the annual TSR over five years, which is 24%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Amneal Pharmaceuticals better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Amneal Pharmaceuticals (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

We will like Amneal Pharmaceuticals better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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