Investing can be hard but the potential fo an individual stock to pay off big time inspires us. You won’t get it right every time, but when you do, the returns can be truly splendid. One bright shining star stock has been Renren Inc. (NYSE:RENN), which is 559% higher than three years ago. Also pleasing for shareholders was the 35% 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. It really delights us to see such great share price performance for investors.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Given that Renren 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Renren actually saw its revenue drop by 75% per year over three years. This is in stark contrast to the strong share price growth of 87%, compound, per year. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Renren’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We’re pleased to report that Renren shareholders have received a total shareholder return of 217% over one year. That gain is better than the annual TSR over five years, which is 70%. 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. It’s always interesting to track share price performance over the longer term. But to understand Renren better, we need to consider many other factors. Even so, be aware that Renren is showing 2 warning signs in our investment analysis , you should know about…
We will like Renren 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.