Ilika plc (LON:IKA) shareholders will doubtless be very grateful to see the share price up 74% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 72% in that time. So it’s about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround.

So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.

Ilika 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 would hope for good top-line growth to make up for the lack of earnings.

In the last three years, Ilika saw its revenue grow by 41% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 20% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn’t lead to profits. If the company is low on cash, it may have to raise capital soon.

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

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

It’s good to see that Ilika has rewarded shareholders with a total shareholder return of 35% in the last twelve months. That’s better than the annualised return of 1.5% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for Ilika (of which 2 are concerning!) you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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