For many, the main point of investing in the stock market is to achieve spectacular returns. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, the Red Rock Resorts, Inc. (NASDAQ:RRR) share price is up a whopping 502% in the last year, a handsome return in a single year. Also pleasing for shareholders was the 44% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. However, the stock hasn't done so well in the longer term, with the stock only up 11% in three years.
It really delights us to see such great share price performance for investors.
Because Red Rock Resorts 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Red Rock Resorts actually shrunk its revenue over the last year, with a reduction of 36%. This is in stark contrast to the splendorous stock price, which has rocketed 502% since this time a year ago. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. To us, a gain like this looks like speculation, but there might be historical trends to back it up.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We're pleased to report that Red Rock Resorts rewarded shareholders with a total shareholder return of 502% over the last year. That's better than the annualized TSR of 5% over the last three years. Given the track record of solid returns over varying time frames, it might be worth putting Red Rock Resorts on your watchlist. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Red Rock Resorts (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
Red Rock Resorts is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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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