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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Ava Risk Group Limited (ASX:AVA) shareholders have had that experience, with the share price dropping 32% in three years, versus a market return of about 43%. And more recent buyers are having a tough time too, with a drop of 26% in the last year. Furthermore, it's down 17% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Check out our latest analysis for Ava Risk Group
Ava Risk Group 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. 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 three years, Ava Risk Group saw its revenue grow by 36% per year, compound. That is faster than most pre-profit companies. While its revenue increased, the share price dropped at a rate of 12% per year. That seems like an unlucky result for holders. It's possible that the prior share price assumed unrealistically high future growth. Still, with high hopes now tempered, now might prove to be an opportunity to buy.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Ava Risk Group's financial health with this free report on its balance sheet.
A Different Perspective
Over the last year, Ava Risk Group shareholders took a loss of 26%. In contrast the market gained about 13%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 12% 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. Before spending more time on Ava Risk Group it might be wise to click here to see if insiders have been buying or selling shares.
But note: Ava Risk Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).