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It hasn't been the best quarter for Ilika plc (LON:IKA) shareholders, since the share price has fallen 20% in that time. But over three years the performance has been really wonderful. Over that time, we've been excited to watch the share price climb an impressive 611%. As long term investors the recent fall doesn't detract all that much from the longer term story. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.
It really delights us to see such great share price performance for investors.
Given that Ilika didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 3 years Ilika saw its revenue grow at 16% per year. That's a very respectable growth rate. Arguably the very strong share price gain of 92% a year is very generous when compared to the revenue growth. After a price rise like that many will have the business, and plenty of them will be wondering whether the price moved too high, too fast.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Ilika will earn in the future (free profit forecasts).
A Different Perspective
It's nice to see that Ilika shareholders have received a total shareholder return of 176% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 25% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Ilika better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Ilika you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
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