These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Red Violet, Inc. (NASDAQ:RDVT) share price is up 71% in the last year, clearly besting than the market return of around 1.6% (not including dividends). So that should have shareholders smiling. We'll need to follow Red Violet for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
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Red Violet isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Red Violet grew its revenue by 81% last year. That's well above most other pre-profit companies. The solid 71% share price gain goes down pretty well, but it's not necessarily as good as you might expect given the top notch revenue growth. So quite frankly it could be a good time to investigate Red Violet in some detail. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we're seeing here?
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Red Violet's earnings, revenue and cash flow.
A Different Perspective
Red Violet shareholders should be happy with the total gain of 71% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 74% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Red Violet by clicking this link.
Red Violet is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.