The 3.1% return this week takes Amneal Pharmaceuticals' (NASDAQ:AMRX) shareholders three-year gains to 74%

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) share price is up 74% in the last three years, clearly besting the market return of around 21% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 49%.

Since it's been a strong week for Amneal Pharmaceuticals shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Amneal Pharmaceuticals

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During the three years of share price growth, Amneal Pharmaceuticals actually saw its earnings per share (EPS) drop 33% per year. This was, in part, due to extraordinary items impacting earning in the last twelve months.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It could be that the revenue growth of 8.8% per year is viewed as evidence that Amneal Pharmaceuticals is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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 49% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Amneal Pharmaceuticals you should be aware of, and 1 of them is potentially serious.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.