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By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Hikma Pharmaceuticals PLC (LON:HIK) share price is up 76% in the last three years, clearly besting the market decline of around 1.7% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.4% in the last year , including dividends .
View our latest analysis for Hikma Pharmaceuticals
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Hikma Pharmaceuticals moved from a loss to profitability. So we would expect a higher share price over the period.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Hikma 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 Hikma Pharmaceuticals' financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Hikma Pharmaceuticals the TSR over the last 3 years was 86%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Hikma Pharmaceuticals provided a TSR of 2.4% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 3% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course Hikma Pharmaceuticals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.