Investors in Iridium Communications (NASDAQ:IRDM) have unfortunately lost 26% over the last three years

While it may not be enough for some shareholders, we think it is good to see the Iridium Communications Inc. (NASDAQ:IRDM) share price up 13% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 28% in the last three years, falling well short of the market return.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

View our latest analysis for Iridium Communications

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Iridium Communications moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

With a rather small yield of just 1.8% we doubt that the stock's share price is based on its dividend. Revenue is actually up 10% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Iridium Communications more closely, as sometimes stocks fall unfairly. This could present an opportunity.

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

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Iridium Communications in this interactive graph of future profit estimates.

A Different Perspective

Investors in Iridium Communications had a tough year, with a total loss of 13% (including dividends), against a market gain of about 39%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Iridium Communications better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Iridium Communications you should be aware of.

Iridium Communications is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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.