Is Riot Blockchain's (NASDAQ:RIOT) 109% Share Price Increase Well Justified?

By
Simply Wall St
Published
August 11, 2020
NasdaqCM:RIOT

Unfortunately, investing is risky - companies can and do go bankrupt. 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 Riot Blockchain, Inc. (NASDAQ:RIOT) share price had more than doubled in just one year - up 109%. It's up an even more impressive 119% over the last quarter. Having said that, the longer term returns aren't so impressive, with stock gaining just 12% in three years.

Check out our latest analysis for Riot Blockchain

Given that Riot Blockchain didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.

Riot Blockchain actually shrunk its revenue over the last year, with a reduction of 6.6%. We're a little surprised to see the share price pop 109% in the last year. It just goes to show the market doesn't always pay attention to the reported numbers. Of course, it could be that the market expected this revenue drop.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
NasdaqCM:RIOT Earnings and Revenue Growth August 11th 2020

This free interactive report on Riot Blockchain's balance sheet strength is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We've already covered Riot Blockchain's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been 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 good to see that Riot Blockchain has rewarded shareholders with a total shareholder return of 109% in the last twelve months. 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. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For example, we've discovered 4 warning signs for Riot Blockchain (2 are significant!) 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 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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