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Some Agency Group Australia (ASX:AU1) Shareholders Have Taken A Painful 90% Share Price Drop

Simply Wall St

As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of The Agency Group Australia Limited (ASX:AU1) investors who have held the stock for three years as it declined a whopping 90%. That would be a disturbing experience. And over the last year the share price fell 64%, so we doubt many shareholders are delighted. On the other hand, we note it's up 9.1% in about a month.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

See our latest analysis for Agency Group Australia

Agency Group Australia isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over three years, Agency Group Australia grew revenue at 58% per year. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 54% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

ASX:AU1 Income Statement, March 9th 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Agency Group Australia's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

The last twelve months weren't great for Agency Group Australia shares, which cost holders 64%, while the market was up about 3.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 54% 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 Agency Group Australia better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with Agency Group Australia (including 3 which is are potentially serious) .

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 AU 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.