The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For instance the Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) share price is 142% higher than it was three years ago. That sort of return is as solid as granite. But it's down 6.9% in the last week.

Although Vertex Pharmaceuticals has shed US$8.7b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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 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.

During the three years of share price growth, Vertex Pharmaceuticals actually saw its earnings per share (EPS) drop 18% per year. In this instance, recent extraordinary items impacted the earnings.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.

It could be that the revenue growth of 12% per year is viewed as evidence that Vertex Pharmaceuticals is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Vertex Pharmaceuticals is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Vertex Pharmaceuticals will earn in the future (free analyst consensus estimates)

A Different Perspective

Vertex Pharmaceuticals shareholders gained a total return of 28% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 15% over half a decade This suggests the company might be improving over time. You could get a better understanding of Vertex Pharmaceuticals' growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like Vertex Pharmaceuticals better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.