1 Stock That Has Grown By Over 180% in the Past Year. Time to Buy and See the Gains Continue?

Key Points

• Roblox's platform has experienced a huge increase in popularity in recent quarters.

• Its finances show considerable increases in free cash flow amid massive losses.

• Roblox's P/S ratio has more than doubled since April.

• 10 stocks we like better than Roblox ›

Roblox (NYSE: RBLX) stock looks to have finally returned to growth. After years of range-bound trading following its massive drop in 2022, the stock has risen by more than 180% over the last year as games such as Grow a Garden have helped revive the popularity of the metaverse platform.

However, a lawsuit pertaining to a critical part of its user base could prompt some of its investors to sell. When also considering the company's ongoing losses and high valuation, investors should question whether the entertainment stock's gains can continue.

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Image source: Getty Images.

The state of Roblox's business

Roblox is a gaming platform where users create and play games. It includes abilities such as communicating with friends or creating a personal avatar. Its traditional following was children under the age of 13, though users who are 13 or over now make up 64% of its daily active user (DAU) base.

Indeed, the growth in DAUs seems to have drawn the attention of investors. That user base, which almost reached 112 million in the second quarter of 2025, grew 41% over the previous year.

That increase has likely drawn more users to purchase Robux, the virtual currency used within the Roblox ecosystem. Robux allow users to buy avatar upgrades and special abilities in games, thereby driving the majority of the company's revenue.

Unfortunately for Roblox bulls, this growth has not occurred without hiccups. The latest difficulty arises from a lawsuit filed by the state of Louisiana. It alleges that Roblox lacks an effective age verification process, allowing predators to lie about their age and prey on children.

Roblox responded, stating that it has introduced over 40 features to protect children and empower parents and guardians to keep them safe. It's too early to tell how this lawsuit will affect Roblox or its stock, but it's a reminder of the challenges the company faces in the marketplace.

Roblox by the numbers

Moreover, investors have cause to question whether the financial improvements are coming too slowly. In the first half of 2025, revenue of just over $2.1 billion increased by 25% compared to the same period last year. The company also limited expense growth to 20%.

The problem is that its nearly $2.7 billion in costs and expenses is well above Roblox's revenue levels. Thus, its $493 million net loss for the first two quarters of 2025 was slightly higher than the $476 million lost during the same timeframe in 2024.

Despite its considerable losses, the free cash flow picture may mitigate the lack of profitability. Free cash flow for the first half of the year was $603 million, nearly doubling from year-ago levels. Thus, when accounting for the $544 million in stock-based compensation expenses and the $539 million in deferred revenue, its financials are in better shape than its net losses might imply.

Also, for 2025, the company forecasts revenue between $4.39 billion and $4.49 billion for the year. If that prediction holds, it will represent a 23% increase, nearly as high as the revenue growth so far this year.

Roblox stock has made considerable gains under those circumstances. Still, those increases have also raised its valuation, taking the stock's price-to-sales (P/S) ratio to nearly 21. Although this is well below post-pandemic levels, it's also Roblox's highest sales multiple since 2022. Since the P/S ratio has more than doubled since April, it may make investors more cautious about buying Roblox stock.

RBLX PS Ratio data by YCharts

Is it time to buy Roblox stock?

Under current conditions, investors should watch Roblox stock, but they should also consider refraining from adding shares at this time.

The company has experienced significant growth in DAUs and revenue over the past few quarters, as the platform's popularity has increased. That should ultimately bode well for the stock's long-term prospects.

Unfortunately, it's unclear how the state of Louisiana's lawsuit against the company will affect Roblox's growth. Additionally, although free cash flows are strong, the massive losses stemming from stock-based compensation and other expenses could continue to weigh on its financials.

When also considering Roblox's increasingly expensive valuation, it's likely best for investors to stay on the sidelines until Roblox's financials show a path to profitability.

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