IRIDEX's (NASDAQ:IRIX) growing losses don't faze investors as the stock surges 18% this past week
One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, IRIDEX Corporation (NASDAQ:IRIX) shareholders have seen the share price rise 52% over three years, well in excess of the market return (14%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 30% in the last year.
Since the stock has added US$7.6m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years IRIDEX has grown its revenue at 17% annually. That's a very respectable growth rate. While the share price has done well, compounding at 15% yearly, over three years, that move doesn't seem over the top. If that's the case, then it could be well worth while to research the growth trajectory. Of course, it's always worth considering funding risks when a company isn't profitable.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
We're pleased to report that IRIDEX shareholders have received a total shareholder return of 30% over one year. That certainly beats the loss of about 7% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 4 warning signs we've spotted with IRIDEX (including 1 which is a bit concerning) .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
