Investors ignore increasing losses at Epileds Technologies (TWSE:4956) as stock jumps 16% this past week

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Epileds Technologies, Inc. (TWSE:4956) which saw its share price drive 129% higher over five years. It's even up 16% in the last week.

Since the stock has added NT$422m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Epileds Technologies

Because Epileds Technologies made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong 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.

Over the last half decade Epileds Technologies' revenue has actually been trending down at about 1.2% per year. Given that scenario, we wouldn't have expected the share price to rise 18% per year, but that's what it did. It just goes to show tht the market is forward looking, and it's not always easy to predict the future based on past trends. Still, we are a bit cautious in this kind of situation.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Epileds Technologies' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Epileds Technologies' TSR of 134% over the last 5 years is better than the share price return.

A Different Perspective

It's good to see that Epileds Technologies has rewarded shareholders with a total shareholder return of 115% in the last twelve months. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Epileds Technologies better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Epileds Technologies (of which 2 don't sit too well with us!) you should know about.

For those who like to find winning investments this free list of undervalued 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 Taiwanese 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.