Statistically speaking, long term investing is a profitable endeavour. But that doesn’t mean long term investors can avoid big losses. For example the Avalon Holdings Corporation (NYSEMKT:AWX) share price dropped 53% over five years. That is extremely sub-optimal, to say the least. And some of the more recent buyers are probably worried, too, with the stock falling 50% in the last year. The falls have accelerated recently, with the share price down 34% in the last three months. Of course, this share price action may well have been influenced by the 21% decline in the broader market, throughout the period.
View our latest analysis for Avalon Holdings
Given that Avalon Holdings 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. 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 five years, Avalon Holdings grew its revenue at 5.1% per year. That’s far from impressive given all the money it is losing. This lacklustre growth has no doubt fueled the loss of 14% per year, in that time. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. However, it’s possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Avalon Holdings’s earnings, revenue and cash flow.
A Different Perspective
We regret to report that Avalon Holdings shareholders are down 50% for the year. Unfortunately, that’s worse than the broader market decline of 10%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 14% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand Avalon Holdings better, we need to consider many other factors. Even so, be aware that Avalon Holdings is showing 4 warning signs in our investment analysis , and 2 of those are a bit concerning…
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 US exchanges.
If you spot an error that warrants correction, please contact the editor at [email protected] 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.