The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. For example, the Rimini Street, Inc. (NASDAQ:RMNI) share price is up 57% in the last 1 year, clearly besting the market return of around 35% (not including dividends). That's a solid performance by our standards! It is also impressive that the stock is up 33% over three years, adding to the sense that it is a real winner.
While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Rimini Street 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last twelve months, Rimini Street's revenue grew by 16%. We respect that sort of growth, no doubt. Buyers pushed the share price 57% in response, which isn't unreasonable. If the company can maintain the revenue growth, the share price could go higher still. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We're pleased to report that Rimini Street rewarded shareholders with a total shareholder return of 57% over the last year. So this year's TSR was actually better than the three-year TSR (annualized) of 10%. Given the track record of solid returns over varying time frames, it might be worth putting Rimini Street on your watchlist. 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 - Rimini Street has 3 warning signs (and 1 which is a bit concerning) we think you should know about.
Of course Rimini Street may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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