While shareholders of ANI Pharmaceuticals (NASDAQ:ANIP) are in the black over 3 years, those who bought a week ago aren't so fortunate

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) share price is up 50% in the last three years, clearly besting the market return of around 19% (not including dividends).

In light of the stock dropping 6.4% 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.

View our latest analysis for ANI 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 three years of share price growth, ANI Pharmaceuticals moved from a loss to profitability. 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).

We know that ANI Pharmaceuticals has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at ANI Pharmaceuticals' financial health with this free report on its balance sheet.

A Different Perspective

ANI Pharmaceuticals shareholders are down 3.8% for the year, but the market itself is up 32%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 4% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand ANI 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 ANI Pharmaceuticals .

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.