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Does IRIDEX's (NASDAQ:IRIX) Share Price Gain of 48% Match Its Business Performance?

Simply Wall St
·3 min read

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the IRIDEX Corporation (NASDAQ:IRIX) share price is up 48% in the last year, clearly besting the market return of around 22% (not including dividends). That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 36% in three years.

Check out our latest analysis for IRIDEX

IRIDEX isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

IRIDEX actually shrunk its revenue over the last year, with a reduction of 17%. Despite the lack of revenue growth, the stock has returned a solid 48% the last twelve months. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We're pleased to report that IRIDEX shareholders have received a total shareholder return of 48% over one year. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with IRIDEX , and understanding them should be part of your investment process.

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.

This article by Simply Wall St is general in nature. 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 (at) simplywallst.com.