Did The Underlying Business Drive Roku's (NASDAQ:ROKU) Lovely 701% Share Price Gain?
For us, stock picking is in large part the hunt for the truly magnificent stocks. You won't get it right every time, but when you do, the returns can be truly splendid. One bright shining star stock has been Roku, Inc. (NASDAQ:ROKU), which is 701% higher than three years ago. It's also up 9.8% in about a month.
We love happy stories like this one. The company should be really proud of that performance!
Check out our latest analysis for Roku
Given that Roku only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last 3 years Roku saw its revenue grow at 42% per year. That's well above most pre-profit companies. And it's not just the revenue that is taking off. The share price is up 100% per year in that time. It's always tempting to take profits after a share price gain like that, but high-growth companies like Roku can sometimes sustain strong growth for many years. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Roku is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We're pleased to report that Roku rewarded shareholders with a total shareholder return of 221% over the last year. That gain actually surpasses the 100% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Roku on your watchlist. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Roku you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
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