Did The Underlying Business Drive Stereotaxis' (NYSEMKT:STXS) Lovely 643% Share Price Gain?

For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. To wit, the Stereotaxis, Inc. (NYSEMKT:STXS) share price has soared 643% over five years. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 36% over the last quarter.

We love happy stories like this one. The company should be really proud of that performance!

See our latest analysis for Stereotaxis

Stereotaxis 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last half decade Stereotaxis' revenue has actually been trending down at about 6.6% per year. So it's pretty surprising to see that the share price is up 49% per year. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. I think it's fair to say there is probably a fair bit of excitement in the price.

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

earnings-and-revenue-growth

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Stereotaxis in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 24% in the last year, Stereotaxis shareholders lost 4.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 49%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Stereotaxis better, we need to consider many other factors. Take risks, for example - Stereotaxis has 3 warning signs we think you should be aware of.

We will like Stereotaxis better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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