Even after rising 13% this past week, IRIDEX (NASDAQ:IRIX) shareholders are still down 64% over the past five years

By
Simply Wall St
Published
March 21, 2022
NasdaqGM:IRIX
Source: Shutterstock

IRIDEX Corporation (NASDAQ:IRIX) shareholders should be happy to see the share price up 13% in the last week. But don't envy holders -- looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 64% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. We'd err towards caution given the long term under-performance.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for IRIDEX

Given that IRIDEX 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 expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, IRIDEX saw its revenue increase by 0.8% per year. That's not a very high growth rate considering it doesn't make profits. This lacklustre growth has no doubt fueled the loss of 10% per year, in that time. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in IRIDEX. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

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

earnings-and-revenue-growth
NasdaqGM:IRIX Earnings and Revenue Growth March 21st 2022

This free interactive report on IRIDEX's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 6.0% in the last year, IRIDEX shareholders lost 37%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. 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. Even so, be aware that IRIDEX is showing 4 warning signs in our investment analysis , you should know about...

But note: IRIDEX may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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