The five-year returns have been incredible for Imugene (ASX:IMU) shareholders despite underlying losses increasing

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the Imugene Limited (ASX:IMU) share price. It's 357% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. It's also up 123% in about a month.

Since it's been a strong week for Imugene shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Imugene

Imugene wasn't profitable in the last twelve months, 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. 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.

In the last 5 years Imugene saw its revenue grow at 33% per year. Even measured against other revenue-focussed companies, that's a good result. Fortunately, the market has not missed this, and has pushed the share price up by 35% per year in that time. Despite the strong run, top performers like Imugene have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling Imugene stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market gained around 1.5% in the last year, Imugene shareholders lost 46%. 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. Longer term investors wouldn't be so upset, since they would have made 35%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Imugene (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Imugene is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.