The last three months have been tough on Rekor Systems, Inc. (NASDAQ:REKR) shareholders, who have seen the share price decline a rather worrying 36%. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 283% in that time. It’s not uncommon to see a share price retrace a bit, after a big gain. The thing to consider is whether the underlying business is doing well enough to support the current price.
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
Because Rekor Systems 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.
Rekor Systems’ revenue trended up 1.2% each year over three years. That’s not a very high growth rate considering it doesn’t make profits. In contrast, the stock has popped 56% per year in that time – an impressive result. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It seems likely that the market is pretty optimistic about Rekor Systems, given it is losing money.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. If you are thinking of buying or selling Rekor Systems stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Rekor Systems shareholders are down 87% for the year, falling short of the market return. Meanwhile, the broader market slid about 5.6%, likely weighing on the stock. Investors are up over three years, booking 56% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. It’s always interesting to track share price performance over the longer term. But to understand Rekor Systems better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Rekor Systems (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do 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 US 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.