Neonode (NASDAQ:NEON) swells 14% this week, taking five-year gains to 328%

It hasn't been the best quarter for Neonode Inc. (NASDAQ:NEON) shareholders, since the share price has fallen 29% in that time. But over five years returns have been remarkably great. In that time, the share price has soared some 328% higher! So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.

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

See our latest analysis for Neonode

Because Neonode 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last half decade Neonode's revenue has actually been trending down at about 8.3% per year. This is in stark contrast to the strong share price growth of 34%, compound, per year. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Neonode

A Different Perspective

It's good to see that Neonode has rewarded shareholders with a total shareholder return of 271% in the last twelve months. That's better than the annualised return of 34% 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. 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 Neonode , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.