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The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term IRIDEX Corporation (NASDAQ:IRIX) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 55% decline in the share price in that time. On the other hand the share price has bounced 5.7% over the last week. We would posit that the recently released financial results have driven this rise, so you might want to check the latest numbers in our full company report.
IRIDEX isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good 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.
In the last three years IRIDEX saw its revenue shrink by 2.4% per year. That is not a good result. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 23% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling IRIDEX stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Investors in IRIDEX had a tough year, with a total loss of 19%, against a market gain of about 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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.
IRIDEX is not the only stock that insiders are buying. 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.
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 email@example.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.