Investors in IOUpay (ASX:IOU) have made a impressive return of 146% over the past five years

IOUpay Limited (ASX:IOU) shareholders might be concerned after seeing the share price drop 30% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. Indeed, the share price is up an impressive 146% in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for IOUpay

IOUpay 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last 5 years IOUpay saw its revenue shrink by 8.0% per year. On the other hand, the share price done the opposite, gaining 20%, compound, each year. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, this situation makes us a little wary of the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's good to see that IOUpay has rewarded shareholders with a total shareholder return of 27% in the last twelve months. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for IOUpay you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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