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Reflecting on Renren's(NYSE:RENN) Total Shareholder Returns Over The Last Five Years

Simply Wall St
·3 min read

Renren Inc. (NYSE:RENN) shareholders will doubtless be very grateful to see the share price up 33% in the last week. But over the last half decade, the stock has not performed well. After all, the share price is down 95% in that time, significantly under-performing the market.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for Renren

Renren 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, Renren saw its revenue increase by 52% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price has averaged a fall of 14% each year, in the same time period. It could be that the stock was over-hyped before. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

Take a more thorough look at Renren's financial health with this free report on its balance sheet.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Renren's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Renren hasn't been paying dividends, but its TSR of -50% exceeds its share price return of -95%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

While the broader market gained around 17% in the last year, Renren shareholders lost 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8.4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Renren better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Renren you should be aware of, and 1 of them is a bit concerning.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.