The Neonode Inc. (NASDAQ:NEON) share price has had a bad week, falling 30%. But that isn't a problem when you consider how the share price has soared over the last year. In that time, shareholders have had the pleasure of a 434% boost to the share price. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.

While the stock has fallen 30% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Neonode

Neonode isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year Neonode saw its revenue shrink by 20%. So it's very confusing to see that the share price gained a whopping 434%. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. To us, a gain like this looks like speculation, but there might be historical trends to back it up.

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

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 Neonode in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that Neonode shareholders have received a total shareholder return of 434% over one year. That gain is better than the annual TSR over five years, which is 30%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Case in point: We've spotted 2 warning signs for Neonode you should be aware of, and 1 of them is a bit unpleasant.

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 American 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.