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Shareholders of Incannex Healthcare (ASX:IHL) Must Be Delighted With Their 844% Total Return

The Incannex Healthcare Limited (ASX:IHL) share price has had a bad week, falling 10%. But that doesn't change the fact that the returns over the last three years have been spectacular. The longer term view reveals that the share price is up 760% in that period. As long term investors the recent fall doesn't detract all that much from the longer term story. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

Anyone who held for that rewarding ride would probably be keen to talk about it.

View our latest analysis for Incannex Healthcare

Given that Incannex Healthcare 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. Shareholders of unprofitable companies usually expect 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.

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Incannex Healthcare's revenue trended up 16% each year over three years. That's pretty nice growth. Arguably the very strong share price gain of 105% a year is very generous when compared to the revenue growth. After a price rise like that many will have the business, and plenty of them will be wondering whether the price moved too high, too fast.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

If you are thinking of buying or selling Incannex Healthcare stock, you should check out this FREE detailed report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Incannex Healthcare'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. We note that Incannex Healthcare's TSR, at 844% is higher than its share price return of 760%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's nice to see that Incannex Healthcare shareholders have gained 378% (in total) over the last year. That's better than the annualized TSR of 111% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand Incannex Healthcare better, we need to consider many other factors. For instance, we've identified 3 warning signs for Incannex Healthcare that 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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.