The last three months have been tough on Inotiv, Inc. (NASDAQ:NOTV) shareholders, who have seen the share price decline a rather worrying 67%. But in stark contrast, the returns over the last half decade have impressed. It's fair to say most would be happy with 185% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 87% drop, in the last year.
Although Inotiv has shed US$244m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Given that Inotiv 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
For the last half decade, Inotiv can boast revenue growth at a rate of 56% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 23% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. Inotiv seems like a high growth stock - so growth investors might want to add it to their watchlist.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Inotiv will earn in the future (free profit forecasts).
A Different Perspective
While the broader market lost about 20% in the twelve months, Inotiv shareholders did even worse, losing 87%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 23%, 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 Inotiv better, we need to consider many other factors. For instance, we've identified 4 warning signs for Inotiv (1 is a bit unpleasant) that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
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