Phibro Animal Health (NASDAQ:PAHC) jumps 5.7% this week, though earnings growth is still tracking behind one-year shareholder returns

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Phibro Animal Health Corporation (NASDAQ:PAHC) share price is up 78% in the last 1 year, clearly besting the market return of around 14% (not including dividends). So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 16% in three years.

Since the stock has added US$51m 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 Phibro Animal Health

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 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.

Phibro Animal Health was able to grow EPS by 31% in the last twelve months. The share price gain of 78% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 49.30.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Phibro Animal Health's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Phibro Animal Health's TSR for the last 1 year was 83%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Phibro Animal Health has rewarded shareholders with a total shareholder return of 83% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.8% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Phibro Animal Health better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Phibro Animal Health you should be aware of, and 2 of them are potentially serious.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.