It is doubtless a positive to see that the Red Lion Hotels Corporation (NYSE:RLH) share price has gained some 52% in the last three months. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 67% in that time. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.
Given that Red Lion Hotels 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years Red Lion Hotels saw its revenue shrink by 25% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 19% (annualized) in the same time period. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. It could be a while before the company repays long suffering shareholders with share price gains.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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 Red Lion Hotels in this interactive graph of future profit estimates.
A Different Perspective
Red Lion Hotels' TSR for the year was broadly in line with the market average, at 26%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 7%, which was endured over half a decade. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. It's always interesting to track share price performance over the longer term. But to understand Red Lion Hotels better, we need to consider many other factors. Take risks, for example - Red Lion Hotels has 3 warning signs we think you should be aware of.
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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