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Introducing AO World (LON:AO.), The Stock That Dropped 47% In The Last Five Years

Simply Wall St

This month, we saw the AO World plc (LON:AO.) up an impressive 57%. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 47% in that half decade.

See our latest analysis for AO World

Given that AO World 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last half decade, AO World saw its revenue increase by 15% per year. That's better than most loss-making companies. The share price drop of 12% per year over five years would be considered let down. So you might argue the AO World should get more credit for its rather impressive revenue growth over the period. If that's the case, now might be the smart time to take a close look at it.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

LSE:AO. Income Statement May 17th 2020

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While it's certainly disappointing to see that AO World shares lost 9.7% throughout the year, that wasn't as bad as the market loss of 14%. Of far more concern is the 12% p.a. loss served to shareholders over the last five years. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. It's always interesting to track share price performance over the longer term. But to understand AO World better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for AO World (of which 1 doesn't sit too well with us!) you should know about.

Of course AO World may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.