It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) share price has soared 202% in the last three years. Most would be happy with that. It's also good to see the share price up 27% over the last quarter. But this could be related to the strong market, which is up 13% in the last three months.

Since the stock has added US$106m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Amphastar Pharmaceuticals

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Amphastar Pharmaceuticals achieved compound earnings per share growth of 171% per year. This EPS growth is higher than the 45% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

We know that Amphastar 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 Amphastar Pharmaceuticals' financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Amphastar Pharmaceuticals shareholders have received a total shareholder return of 95% over one year. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 Amphastar Pharmaceuticals .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.