If you love investing in stocks you’re bound to buy some losers. Long term Ambition Group Limited (ASX:AMB) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 65% in that time. And the ride hasn’t got any smoother in recent times over the last year, with the price 53% lower in that time.
Because Ambition Group is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, Ambition Group’s revenue dropped 2.3% per year. That is not a good result. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 29% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We’d be pretty wary of this one until it makes a profit, because we don’t specialize in finding turnaround situations.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
If you are thinking of buying or selling Ambition Group stock, you should check out this FREE detailed report on its balance sheet.
A Dividend Lost
It’s important to keep in mind that we’ve been talking about the share price returns, which don’t include dividends, while the total shareholder return does. In some ways, TSR is a better measure of how well an investment has performed. Over the last 3 years, Ambition Group generated a TSR of -62%, which is, of course, better than the share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.
A Different Perspective
While the broader market gained around 11% in the last year, Ambition Group shareholders lost 53%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Before spending more time on Ambition Group it might be wise to click here to see if insiders have been buying or selling shares.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.