While it may not be enough for some shareholders, we think it is good to see the Roku, Inc. (NASDAQ:ROKU) share price up 26% in a single quarter. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 76% in that time. So it sure is nice to see a bit of an improvement. Only time will tell if the company can sustain the turnaround.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Given that Roku 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Roku grew revenue at 13% per year. That's a fairly respectable growth rate. So it seems unlikely the 21% share price drop (each year) is entirely about the revenue. It could be that the losses were much larger than expected. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Roku in this interactive graph of future profit estimates.
A Different Perspective
Roku shareholders gained a total return of 14% during the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 8% per year, over five years. It could well be that the business is stabilizing. 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. Take risks, for example - Roku has 1 warning sign we think you should be aware of.
Roku is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
