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When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Innovative Industrial Properties, Inc. (NYSE:IIPR) share price has soared 148% return in just a single year. It's also good to see the share price up 34% over the last quarter. We'll need to follow Innovative Industrial Properties for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
We don't think that Innovative Industrial Properties's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over the last twelve months, Innovative Industrial Properties's revenue grew by 130%. That's a head and shoulders above most loss-making companies. And the share price has responded, gaining 148% as we previously mentioned. It's great to see strong revenue growth, but the question is whether it can be sustained. Given the positive sentiment around the stock we're cautious, but there's no doubt its worth watching.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Innovative Industrial Properties will earn in the future (free profit forecasts).
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Innovative Industrial Properties the TSR over the last year was 155%, 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
Innovative Industrial Properties shareholders should be happy with the total gain of 155% over the last twelve months, including dividends. And the share price momentum remains respectable, with a gain of 34% in the last three months. This suggests the company is continuing to win over new investors. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.