Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Aston Martin Lagonda Global Holdings plc (LON:AML) have suffered share price declines over the last year. The share price has slid 90% in that time. Aston Martin Lagonda Global Holdings may have better days ahead, of course; we've only looked at a one year period. The falls have accelerated recently, with the share price down 23% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Aston Martin Lagonda Global Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Aston Martin Lagonda Global Holdings' revenue didn't grow at all in the last year. In fact, it fell 32%. That's not what investors generally want to see. The share price fall of 90% in a year tells the story. Holders should not lose the lesson: loss making companies should grow revenue. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Aston Martin Lagonda Global Holdings stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Aston Martin Lagonda Global Holdings' total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Aston Martin Lagonda Global Holdings' TSR, at -68% is higher than its share price return of -90%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Aston Martin Lagonda Global Holdings shareholders are down 68% for the year, even worse than the market loss of 11%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 23% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Even so, be aware that Aston Martin Lagonda Global Holdings is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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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