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If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the The RealReal, Inc. (NASDAQ:REAL) share price is 38% higher than it was a year ago, much better than the market return of around 23% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! RealReal hasn't been listed for long, so it's still not clear if it is a long term winner.
RealReal wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year RealReal saw its revenue grow by 4.9%. That's not great considering the company is losing money. In keeping with the revenue growth, the share price gained 38% in that time. That's not a standout result, but it is solid - much like the level of revenue growth. It could be worth keeping an eye on this one, especially if growth accelerates.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
RealReal is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for RealReal in this interactive graph of future profit estimates.
A Different Perspective
It's nice to see that RealReal shareholders have gained 38% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 60% in that time. This suggests the company is continuing to win over new investors. 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. Even so, be aware that RealReal is showing 4 warning signs in our investment analysis , you should know about...
Of course RealReal 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 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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