Would Shareholders Who Purchased Armstrong Flooring's(NYSE:AFI) Stock Three Years Be Happy With The Share price Today?

While it may not be enough for some shareholders, we think it is good to see the Armstrong Flooring, Inc. (NYSE:AFI) share price up 26% in a single quarter. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 74% in the last three years. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.

Check out our latest analysis for Armstrong Flooring

Given that Armstrong Flooring didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years Armstrong Flooring saw its revenue shrink by 17% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 20%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Armstrong Flooring's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Armstrong Flooring shareholders are down 44% for the year, but the broader market is up 20%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 20% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Armstrong Flooring (of which 1 makes us a bit uncomfortable!) you should know about.

Armstrong Flooring is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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. 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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