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Does RightCrowd's (ASX:RCW) Share Price Gain of 63% Match Its Business Performance?

It hasn't been the best quarter for RightCrowd Limited (ASX:RCW) shareholders, since the share price has fallen 19% in that time. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. In that time we've seen the stock easily surpass the market return, with a gain of 63%.

View our latest analysis for RightCrowd

Because RightCrowd made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

RightCrowd grew its revenue by 14% last year. We respect that sort of growth, no doubt. Buyers pushed the share price 63% in response, which isn't unreasonable. If revenue stays on trend, there may be plenty more share price gains to come. But it's crucial to check profitability and cash flow before forming a view on the future.

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
earnings-and-revenue-growth

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

It's nice to see that RightCrowd shareholders have gained 63% (in total) over the last year. What is absolutely clear is that is far preferable to the dismal 4% average annual loss suffered over the last three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for RightCrowd (of which 1 is significant!) you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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