Investing in RealReal (NASDAQ:REAL) a year ago would have delivered you a 122% gain

It might be of some concern to shareholders to see the The RealReal, Inc. (NASDAQ:REAL) share price down 24% in the last month. Despite this, the stock is a strong performer over the last year, no doubt about that. During that period, the share price soared a full 122%. So it may be that the share price is simply cooling off after a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.

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.

Check out our latest analysis for RealReal

Given that RealReal 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last year RealReal saw its revenue shrink by 7.9%. So we would not have expected the share price to rise 122%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think RealReal will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that RealReal shareholders have received a total shareholder return of 122% over one year. There's no doubt those recent returns are much better than the TSR loss of 14% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For instance, we've identified 4 warning signs for RealReal (1 shouldn't be ignored) that you should be aware of.

RealReal 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.

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