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Is Luna Innovations's (NASDAQ:LUNA) Share Price Gain Of 292% Well Earned?

Simply Wall St

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. To wit, the Luna Innovations Incorporated (NASDAQ:LUNA) share price has flown 292% in the last three years. How nice for those who held the stock! It's also good to see the share price up 22% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 11% in 90 days).

Check out our latest analysis for Luna Innovations

Given that Luna Innovations only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Luna Innovations actually saw its revenue drop by 0.5% per year over three years. So the share price gain of 58% per year is quite surprising. It's fair to say shareholders are definitely counting on a bright future.

You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).

NasdaqCM:LUNA Income Statement, April 16th 2019

It is of course excellent to see how Luna Innovations has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Luna Innovations stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Luna Innovations has rewarded shareholders with a total shareholder return of 23% in the last twelve months. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

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 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 editorial-team@simplywallst.com. 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.