Does RightCrowd's (ASX:RCW) Share Price Gain of 64% Match Its Business Performance?

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the RightCrowd Limited (ASX:RCW) share price is 64% higher than it was a year ago, much better than the market return of around 2.0% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 29% higher than it was three years ago.

See our latest analysis for RightCrowd

RightCrowd 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year RightCrowd saw its revenue grow by 23%. That's a fairly respectable growth rate. While the share price performed well, gaining 64% over twelve months, you could argue the revenue growth warranted it. If the company can maintain the revenue growth, the share price could go higher still. But it's crucial to check profitability and cash flow before forming a view on the future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Pleasingly, RightCrowd's total shareholder return last year was 64%. That gain actually surpasses the 9% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand RightCrowd better, we need to consider many other factors. For example, we've discovered 4 warning signs for RightCrowd (1 is a bit concerning!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

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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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