Strong week for ImpediMed (ASX:IPD) shareholders doesn't alleviate pain of three-year loss

ImpediMed Limited (ASX:IPD) shareholders should be happy to see the share price up 24% in the last week. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 63% in that time. So it's good to see it climbing back up. After all, could be that the fall was overdone.

While the last three years has been tough for ImpediMed shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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Given that ImpediMed 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years, ImpediMed saw its revenue grow by 1.8% per year, compound. That's not a very high growth rate considering it doesn't make profits. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 18% during the period. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think ImpediMed will earn in the future (free profit forecasts).

A Different Perspective

While the broader market gained around 7.0% in the last year, ImpediMed shareholders lost 50%. 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. On the bright side, long term shareholders have made money, with a gain of 1.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - ImpediMed has 3 warning signs (and 1 which is concerning) we think you should know about.

ImpediMed is not the only stock that insiders are buying. For those who like to find lesser know companies 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 Australian 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.