The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Catalent, Inc. (NYSE:CTLT) share price has soared 211% in the last half decade. Most would be very happy with that. It's even up 8.2% in the last week. But this might be partly because the broader market had a good week last week, gaining 6.3%.

Since the stock has added US$1.5b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Catalent

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During five years of share price growth, Catalent achieved compound earnings per share (EPS) growth of 26% per year. That makes the EPS growth particularly close to the yearly share price growth of 25%. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Catalent has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Catalent's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Catalent shareholders have received a total shareholder return of 1.2% over the last year. However, the TSR over five years, coming in at 25% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. For instance, we've identified 2 warning signs for Catalent (1 can't be ignored) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.