Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Agora S.A. (WSE:AGO) have had an unfortunate run in the last three years. So they might be feeling emotional about the 57% share price collapse, in that time. There was little comfort for shareholders in the last week as the price declined a further 1.6%.
Agora isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
In the last three years Agora saw its revenue shrink by 4.4% 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 16% per year. Of course, it's the future that will determine whether today's price is a good one. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Agora stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Agora's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Agora shareholders, and that cash payout explains why its total shareholder loss of 53%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 43% in the last year, Agora shareholders lost 20%. 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 7% 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. It's always interesting to track share price performance over the longer term. But to understand Agora better, we need to consider many other factors. Even so, be aware that Agora is showing 1 warning sign in our investment analysis , you should know about...
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL 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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