Shareholders in Indigo Books & Music (TSE:IDG) are in the red if they invested five years ago

While it may not be enough for some shareholders, we think it is good to see the Indigo Books & Music Inc. (TSE:IDG) share price up 23% in a single quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 66% after a long stretch. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a 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.

View our latest analysis for Indigo Books & Music

Because Indigo Books & Music made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over five years, Indigo Books & Music grew its revenue at 0.9% per year. That's far from impressive given all the money it is losing. This lacklustre growth has no doubt fueled the loss of 11% per year, in that time. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Indigo Books & Music has rewarded shareholders with a total shareholder return of 31% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 11% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Indigo Books & Music better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Indigo Books & Music (of which 1 is potentially serious!) you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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