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Some Gogo Shareholders Have Taken A Painful 81% Share Price Drop

Simply Wall St

Gogo Inc. (NASDAQ:GOGO) shareholders should be happy to see the share price up 16% in the last quarter. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 81% lower after that period. While the recent increase might be a green shoot, we’re certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.

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 Gogo

Given that Gogo 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.

In the last half decade, Gogo saw its revenue increase by 19% per year. That’s well above most other pre-profit companies. So it’s not at all clear to us why the share price sunk 29% throughout that time. You’d have to assume the market is worried that profits won’t come soon enough. While there might be an opportunity here, you’d want to take a close look at the balance sheet strength.

You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).

NasdaqGS:GOGO Income Statement, March 4th 2019

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. This free report showing analyst forecasts should help you form a view on Gogo

A Different Perspective

While the broader market gained around 5.3% in the last year, Gogo shareholders lost 51%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 29% per year over five years. We realise that Buffett 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 businesses. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Gogo by clicking this link.

Gogo 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 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 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. Thank you for reading.