Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Redbox Entertainment Inc. (NASDAQ:RDBX) have tasted that bitter downside in the last year, as the share price dropped 13%. That's disappointing when you consider the market returned 18%. Redbox Entertainment may have better days ahead, of course; we've only looked at a one year period. It's down 34% in about a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
If the past week is anything to go by, investor sentiment for Redbox Entertainment isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Redbox Entertainment wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.
In just one year Redbox Entertainment saw its revenue fall by 52%. If you think that's a particularly bad result, you're statistically on the money Meanwhile, the share price dropped by 13%. We would want to see improvements in the core business, and diminishing losses, before getting too excited about this one.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
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
While Redbox Entertainment shareholders are down 13% for the year, the market itself is up 18%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's worth noting that the last three months did the real damage, with a 14% decline. So it seems like some holders have been dumping the stock of late - and that's not bullish. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Redbox Entertainment (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
We will like Redbox Entertainment 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
