IODM (ASX:IOD) shareholders are up 11% this past week, but still in the red over the last three years
It is a pleasure to report that the IODM Limited (ASX:IOD) is up 43% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 64% in that period. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.
The recent uptick of 11% could be a positive sign of things to come, so let's take a look at historical fundamentals.
Given that IODM 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, IODM grew revenue at 36% per year. That's well above most other pre-profit companies. The share price has moved in quite the opposite direction, down 18% over that time, a bad result. This could mean hype has come out of the stock because the losses are concerning investors. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 6.2% in the last year, IODM shareholders lost 6.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.2% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For example, we've discovered 5 warning signs for IODM (3 can't be ignored!) that you should be aware of before investing here.
We will like IODM better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.