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Did Rambus' (NASDAQ:RMBS) Share Price Deserve to Gain 10%?

Simply Wall St
·2 mins read

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Rambus Inc. (NASDAQ:RMBS), share price is up over the last year, but its gain of 10% trails the market return. However, the longer term returns haven't been so impressive, with the stock up just 5.9% in the last three years.

See our latest analysis for Rambus

Given that Rambus 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. 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 does expect good top-line growth.

In the last year Rambus saw its revenue grow by 2.7%. That's not a very high growth rate considering it doesn't make profits. Over that time the share price gained a very modest 10%. A closer look at the bottom line might reveal an opportunity.

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

earnings-and-revenue-growth
earnings-and-revenue-growth

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Rambus shareholders gained a total return of 10% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 0.8% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Rambus better, we need to consider many other factors. Take risks, for example - Rambus has 2 warning signs we think you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies 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 US exchanges.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.