We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. Take, for example, the Innodata Inc. (NASDAQ:INOD) share price, which skyrocketed 503% over three years. It's even up 12% in the last week.
We love happy stories like this one. The company should be really proud of that performance!
Given that Innodata only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 3 years Innodata saw its revenue shrink by 0.4% per year. This is in stark contrast to the strong share price growth of 82%, compound, per year. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. So there is a serious possibility that some holders are counting their chickens before they hatch.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We're pleased to report that Innodata shareholders have received a total shareholder return of 402% over one year. That gain is better than the annual TSR over five years, which is 23%. Therefore it seems like sentiment around the company has been positive lately. 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 Innodata better, we need to consider many other factors. For instance, we've identified 3 warning signs for Innodata that you should be aware of.
But note: Innodata 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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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. 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.
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