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Some Ideanomics, Inc. (NASDAQ:IDEX) shareholders are probably rather concerned to see the share price fall 51% over the last three months. But that doesn't change the fact that the returns over the last year have been spectacular. Few could complain about the impressive 403% rise, throughout the period. So the recent fall isn't enough to negate the good performance. The real question is whether the fundamental business performance can justify the strong increase over the long term.
Given that Ideanomics 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. Shareholders of unprofitable companies usually expect strong revenue growth. 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.
Ideanomics actually shrunk its revenue over the last year, with a reduction of 40%. So it's very confusing to see that the share price gained a whopping 403%. It's pretty clear the market isn't basing its valuation on fundamental metrics like revenue. To us, a gain like this looks like speculation, but there might be historical trends to back it up.
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 Ideanomics will earn in the future (free profit forecasts).
A Different Perspective
It's nice to see that Ideanomics shareholders have received a total shareholder return of 403% over the last year. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 3 warning signs with Ideanomics (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
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