Is Riot Blockchain's (NASDAQ:RIOT) Share Price Gain Of 128% Well Earned?

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

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Riot Blockchain, Inc. (NASDAQ:RIOT) share price has soared 128% in the last year. Most would be very happy with that, especially in just one year! The last week saw the share price soften some 2.8%. In contrast, the longer term returns are negative, since the share price is 56% lower than it was three years ago.

Check out our latest analysis for Riot Blockchain

Riot Blockchain wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.

Over the last twelve months, Riot Blockchain's revenue grew by 9.2%. That's not a very high growth rate considering it doesn't make profits. So we wouldn't have expected the share price to rise by 128%. We're happy that investors have made money, though we wonder if the increase will be sustained. It's quite likely that the market is considering other factors, not just revenue growth.

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 November 11th 2020

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Riot Blockchain in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that Riot Blockchain shareholders have received a total shareholder return of 128% over the last year. That gain is better than the annual TSR over five years, which is 11%. 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. Case in point: We've spotted 5 warning signs for Riot Blockchain you should be aware of, and 1 of them doesn't sit too well with us.

We will like Riot Blockchain better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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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