The Roku, Inc. (NASDAQ:ROKU) share price has had a bad week, falling 11%. But at least the stock is up over the last year. In that time, it is up 11%, which isn't bad, but is below the market return of 19%.
Roku 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.
Over the last twelve months, Roku's revenue grew by 49%. That's stonking growth even when compared to other loss-making stocks. Let's face it the 11% share price gain in that time is underwhelming compared to the growth. When revenue spikes but the share price doesn't we can't help wondering if the market is missing something. It could be that the stock was previously over-hyped, or that losses are causing concern for the market, but this could be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Roku is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Roku in this interactive graph of future profit estimates.
A Different Perspective
Roku shareholders have gained 11% for the year. Unfortunately this falls short of the market return of around 19%. However, that falls short of the 41% gain it has made, for shareholders, in the last three months. The very recent increase in the share price could be evidence that the narrative is changing for the better due to fundamental improvements. 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. For example, we've discovered 3 warning signs for Roku that you should be aware of before investing here.
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.
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