We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Integrated Research Limited (ASX:IRI) for half a decade as the share price tanked 84%. Even worse, it's down 14% in about a month, which isn't fun at all. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Integrated Research

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Integrated Research became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

It could be that the revenue decline of 9.3% per year is viewed as evidence that Integrated Research is shrinking. This has probably encouraged some shareholders to sell down the stock.

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

We know that Integrated Research has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Integrated Research's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Integrated Research shareholders have received a total shareholder return of 71% over one year. That's including the dividend. Notably the five-year annualised TSR loss of 13% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Integrated Research better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Integrated Research (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course Integrated Research may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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