Amphastar Pharmaceuticals (NASDAQ:AMPH) shareholders have earned a 22% CAGR over the last 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 the bright side, you can make far more than 100% on a really good stock. One great example is Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) which saw its share price drive 174% higher over five years. On top of that, the share price is up 36% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Amphastar 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last half decade, Amphastar Pharmaceuticals became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Amphastar Pharmaceuticals share price has gained 137% in three years. During the same period, EPS grew by 20% each year. This EPS growth is lower than the 33% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.

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 Amphastar Pharmaceuticals has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

It's nice to see that Amphastar Pharmaceuticals shareholders have received a total shareholder return of 14% over the last year. However, the TSR over five years, coming in at 22% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Take risks, for example - Amphastar Pharmaceuticals has 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of growing 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.

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