Shareholders have faith in loss-making Neonode (NASDAQ:NEON) as stock climbs 68% in past week, taking one-year gain to 693%

For many, the main point of investing in the stock market is to achieve spectacular returns. When you buy and hold the right company, the returns can make a huge difference to both you and your family. In the case of Neonode Inc. (NASDAQ:NEON), the share price is up an incredible 693% in the last year alone. Also pleasing for shareholders was the 109% gain in the last three months. It is also impressive that the stock is up 163% over three years, adding to the sense that it is a real winner. We love happy stories like this one. The company should be really proud of that performance!

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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Neonode isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 would hope for good top-line growth to make up for the lack of earnings.

In the last year Neonode saw its revenue shrink by 17%. So it's very confusing to see that the share price gained a whopping 693%. It's pretty clear the market isn't basing its valuation on fundamental metrics like revenue. While this gain looks like speculative buying to us, sometimes speculation pays off.

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

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

A Different Perspective

We're pleased to report that Neonode shareholders have received a total shareholder return of 693% over one year. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Neonode better, we need to consider many other factors. Even so, be aware that Neonode is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

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.

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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.