It hasn't been the best quarter for Inspire Medical Systems, Inc. (NYSE:INSP) shareholders, since the share price has fallen 21% in that time. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. Indeed, the share price is up a very strong 203% in that time. It's not uncommon to see a share price retrace a bit, after a big gain. The thing to consider is whether the underlying business is doing well enough to support the current price.
Since the stock has added US$392m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Inspire Medical Systems isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Inspire Medical Systems' revenue trended up 52% each year over three years. That's much better than most loss-making companies. Meanwhile, the share price performance has been pretty solid at 45% compound over three years. But it does seem like the market is paying attention to strong revenue growth. Nonetheless, we'd say Inspire Medical Systems is still worth investigating - successful businesses can often keep growing for long periods.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Inspire Medical Systems
A Different Perspective
It's nice to see that Inspire Medical Systems shareholders have gained 9.5% (in total) over the last year. That falls short of the 45% it has made, for shareholders, each year, over three years. 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 2 warning signs for Inspire Medical Systems you should be aware of.
But note: Inspire Medical Systems may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here