Unfortunately, investing is risky - companies can and do go bankrupt. But when you pick a company that is really flourishing, you can make more than 100%. Take, for example Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX). Its share price is already up an impressive 128% in the last twelve months. It's also good to see the share price up 11% over the last quarter. Having said that, the longer term returns aren't so impressive, with stock gaining just 28% in three years.
Since the long term performance has been good but there's been a recent pullback of 4.4%, let's check if the fundamentals match the share price.
Amneal Pharmaceuticals wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Amneal Pharmaceuticals saw its revenue grow by 9.8%. That's not a very high growth rate considering it doesn't make profits. So we wouldn't have expected the share price to rise by 128%. We're happy that investors have made money, though we wonder if the increase will be sustained. We're not so sure that revenue growth is driving the market optimism about the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Amneal Pharmaceuticals in this interactive graph of future profit estimates.
A Different Perspective
It's nice to see that Amneal Pharmaceuticals shareholders have received a total shareholder return of 128% over the last year. That gain is better than the annual TSR over five years, which is 0.4%. Therefore it seems like sentiment around the company has been positive lately. 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. For instance, we've identified 3 warning signs for Amneal Pharmaceuticals (1 doesn't sit too well with us) that you should be aware of.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com