Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) shareholders might be concerned after seeing the share price drop 26% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. The share price marched upwards over that time, and is now 131% higher than it was. To some, the recent share price pullback wouldn't be surprising after such a good run. The thing to consider is whether the underlying business is doing well enough to support the current price.

In light of the stock dropping 3.3% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

See our latest analysis for Amphastar Pharmaceuticals

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 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 three years of share price growth, Amphastar Pharmaceuticals achieved compound earnings per share growth of 358% per year. This EPS growth is higher than the 32% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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

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

Investors in Amphastar Pharmaceuticals had a tough year, with a total loss of 4.1%, against a market gain of about 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Amphastar Pharmaceuticals better, we need to consider many other factors. For instance, we've identified 2 warning signs for Amphastar Pharmaceuticals that you should be aware of.

But note: Amphastar Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.