Generally speaking long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example, after five long years the Ardent Leisure Group Limited (ASX:ALG) share price is a whole 68% lower. We certainly feel for shareholders who bought near the top. And some of the more recent buyers are probably worried, too, with the stock falling 57% in the last year. The falls have accelerated recently, with the share price down 27% in the last three months.
Ardent Leisure Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Over half a decade Ardent Leisure Group reduced its trailing twelve month revenue by 1.8% for each year. That's not what investors generally want to see. With neither profit nor revenue growth, the loss of 11% per year doesn't really surprise us. We don't think anyone is rushing to buy this stock. Ultimately, it may be worth watching - should revenue pick up, the share price might follow.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Ardent Leisure Group stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered Ardent Leisure Group's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Ardent Leisure Group's TSR of was a loss of 66% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in Ardent Leisure Group had a tough year, with a total loss of 57%, against a market gain of about 2.7%. 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 11% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 example, we've discovered 2 warning signs for Ardent Leisure Group that you should be aware of before investing here.
If you are like me, then you will 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 AU exchanges.
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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. 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.
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