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Regis Corporation (NYSE:RGS) shareholders will doubtless be very grateful to see the share price up 44% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 21% in the last three years, falling well short of the market return.
Regis isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years Regis saw its revenue shrink by 28% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 6% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Regis' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Regis shareholders gained a total return of 1.2% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 3% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Regis better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Regis , and understanding them should be part of your investment process.
Of course Regis 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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