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By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Intelligent Monitoring Group Limited (ASX:IMB), which is up 100%, over three years, soundly beating the market decline of 3.8% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 41% in the last year.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Intelligent Monitoring Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years Intelligent Monitoring Group has grown its revenue at 77% annually. That's well above most pre-profit companies. While the compound gain of 26% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. So now might be the perfect time to put Intelligent Monitoring Group on your radar. If the company is trending towards profitability then it could be very interesting.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic .
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Intelligent Monitoring Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Intelligent Monitoring Group hasn't been paying dividends, but its TSR of 131% exceeds its share price return of 100%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's good to see that Intelligent Monitoring Group has rewarded shareholders with a total shareholder return of 41% in the last twelve months. That certainly beats the loss of about 11% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Intelligent Monitoring Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Intelligent Monitoring Group you should be aware of.