It is doubtless a positive to see that the Aston Martin Lagonda Global Holdings plc (LON:AML) share price has gained some 58% in the last three months. But only the myopic could ignore the astounding decline over three years. In that time the share price has melted like a snowball in the desert, down 98%. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With the stock having lost 8.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Aston Martin Lagonda Global Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 three years, Aston Martin Lagonda Global Holdings grew revenue at 12% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 26% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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)?
Investors should note that there's a difference between Aston Martin Lagonda Global Holdings' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Aston Martin Lagonda Global Holdings' TSR, at -84% is higher than its share price return of -98%. 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 70% for the year, falling short of the market return. The market shed around 3.9%, no doubt weighing on the stock price. Shareholders have lost 23% 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. It's always interesting to track share price performance over the longer term. But to understand Aston Martin Lagonda Global Holdings better, we need to consider many other factors. Even so, be aware that Aston Martin Lagonda Global Holdings is showing 2 warning signs in our investment analysis , you should know about...
Aston Martin Lagonda Global Holdings 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 GB 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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