Those who invested in Gilead Sciences (NASDAQ:GILD) three years ago are up 49%

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. Just take a look at Gilead Sciences, Inc. (NASDAQ:GILD), which is up 31%, over three years, soundly beating the market return of 17% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 1.3% , including dividends .

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Gilead Sciences

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 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.

Gilead Sciences became profitable within the last three years. So we would expect a higher share price over the period.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Gilead Sciences has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Gilead Sciences stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Gilead Sciences the TSR over the last 3 years was 49%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Gilead Sciences provided a TSR of 1.3% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 6% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with Gilead Sciences .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.