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Introducing ImpediMed (ASX:IPD), The Stock That Tanked 73%

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ImpediMed Limited (ASX:IPD) shareholders should be happy to see the share price up 11% in the last quarter. But only the myopic could ignore the astounding decline over three years. Indeed, the share price is down a whopping 73% in the last three years. So we're relieved for long term holders to see a bit of uplift. The thing to think about is whether the business has really turned around.

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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

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In the last three years ImpediMed saw its revenue shrink by 7.6% per year. That is not a good result. The share price fall of 36% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

ASX:IPD Income Statement, April 4th 2019
ASX:IPD Income Statement, April 4th 2019

Take a more thorough look at ImpediMed's financial health with this free report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between ImpediMed's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. ImpediMed hasn't been paying dividends, but its TSR of -73% exceeds its share price return of -73%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

While the broader market gained around 13% in the last year, ImpediMed shareholders lost 71%. 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 1.0% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on ImpediMed it might be wise to click here to see if insiders have been buying or selling shares.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.