Unfortunately, investing is risky - companies can and do go bankrupt. But when you pick a company that is really flourishing, you can make more than 100%. Take, for example Riot Blockchain, Inc. (NASDAQ:RIOT). Its share price is already up an impressive 109% in the last twelve months. It's up an even more impressive 119% over the last quarter. The longer term returns have not been as good, with the stock price only 12% higher than it was three years ago.
Riot Blockchain isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Riot Blockchain saw its revenue shrink by 6.6%. We're a little surprised to see the share price pop 109% in the last year. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Riot Blockchain's financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Riot Blockchain's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Riot Blockchain hasn't been paying dividends, but its TSR of 109% exceeds its share price return of 109%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's nice to see that Riot Blockchain shareholders have received a total shareholder return of 109% over the last year. That gain is better than the annual TSR over five years, which is 7.1%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 4 warning signs for Riot Blockchain (2 shouldn't be ignored!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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