These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Golden Entertainment, Inc. (NASDAQ:GDEN) share price is up 99% in the last five years, slightly above the market return. Zooming in, the stock is up a respectable 6.5% in the last year.
See our latest analysis for Golden Entertainment
Golden Entertainment isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
For the last half decade, Golden Entertainment can boast revenue growth at a rate of 27% per year. Even measured against other revenue-focussed companies, that’s a good result. It’s good to see that the stock has 15%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we’d expect the share price to follow, in time. Opportunity lies where the market hasn’t fully priced growth in the underlying business.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Golden Entertainment will earn in the future (free profit forecasts).
What about the Total Shareholder Return (TSR)?
We’ve already covered Golden Entertainment’s share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Golden Entertainment hasn’t been paying dividends, but its TSR of 128% exceeds its share price return of 99%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Golden Entertainment provided a TSR of 6.5% over the last twelve months. Unfortunately this falls short of the market return. It’s probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 18% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It’s always interesting to track share price performance over the longer term. But to understand Golden Entertainment better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Golden Entertainment .
Golden Entertainment is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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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