Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Digital Ally, Inc. (NASDAQ:DGLY) shareholders. Unfortunately, they have held through a 60% decline in the share price in that time. And over the last year the share price fell 29%, so we doubt many shareholders are delighted. It's down 62% in about a quarter.
Because Digital Ally is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
In the last three years Digital Ally saw its revenue shrink by 21% per year. That means its revenue trend is very weak compared to other loss making companies. Arguably, the market has responded appropriately to this business performance by sending the share price down 26% (annualized) in the same time period. When revenue is dropping, and losses are still costing, and the share price sinking fast, it's fair to ask if something is remiss. It could be a while before the company repays long suffering shareholders with share price gains.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Digital Ally's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Digital Ally shareholders are down 29% for the year, but the market itself is up 8.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 14% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Digital Ally's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.