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As every investor would know, you don't hit a homerun every time you swing. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held ImpediMed Limited (ASX:IPD) during the last year don't lose the lesson, in addition to the 74% hit to the value of their shares. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Even if you look out three years, the returns are still disappointing, with the share price down56% in that time. Furthermore, it's down 34% in about a quarter. That's not much fun for holders.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for ImpediMed
Given that ImpediMed 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
ImpediMed's revenue didn't grow at all in the last year. In fact, it fell 5.0%. That looks pretty grim, at a glance. The market obviously agrees, since the share price tanked 74%. Holders should not lose the lesson: loss making companies should grow revenue. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think ImpediMed will earn in the future (free profit forecasts).
A Different Perspective
Investors in ImpediMed had a tough year, with a total loss of 74%, against a market gain of about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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. To that end, you should be aware of the 2 warning signs we've spotted with ImpediMed .