As an investor, mistakes are inevitable. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of PlayAGS, Inc. (NYSE:AGS), who have seen the share price tank a massive 74% over a three year period. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 42% lower in that time. Even worse, it's down 12% in about a month, which isn't fun at all. But this could be related to poor market conditions -- stocks are down 6.4% in the same time.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Because PlayAGS made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last three years, PlayAGS' revenue dropped 9.6% per year. That's not what investors generally want to see. Having said that the 20% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
PlayAGS shareholders are down 42% for the year, falling short of the market return. Meanwhile, the broader market slid about 17%, likely weighing on the stock. Shareholders have lost 20% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with PlayAGS , and understanding them should be part of your investment process.
Of course PlayAGS 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 US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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