Is Golden Entertainment's (NASDAQ:GDEN) Share Price Gain Of 285% Well Earned?

By
Simply Wall St
Published
April 14, 2021
NasdaqGM:GDEN

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Golden Entertainment, Inc. (NASDAQ:GDEN) share price has soared 285% in the last year. Most would be very happy with that, especially in just one year! On top of that, the share price is up 39% in about a quarter. However, the longer term returns haven't been so impressive, with the stock up just 13% in the last three years.

See our latest analysis for Golden Entertainment

Because Golden Entertainment made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year Golden Entertainment saw its revenue shrink by 29%. So we would not have expected the share price to rise 285%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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

earnings-and-revenue-growth
NasdaqGM:GDEN Earnings and Revenue Growth April 14th 2021

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that Golden Entertainment shareholders have received a total shareholder return of 285% over one year. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Golden Entertainment has 2 warning signs we think you should be aware of.

But note: Golden Entertainment may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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