For many investors, the main point of stock
picking is to generate higher returns than the overall market. But
if you try your hand at stock picking, your risk returning less
than the market. We regret to report that long term
Armstrong Flooring, Inc. (NYSE:AFI) shareholders
have had that experience, with the share price dropping 33% in
three years, versus a market return of about 42%. Furthermore, it's
down 20% in about a quarter. That's not much fun for holders. We
note that the company has reported results fairly recently; and the
market is hardly delighted. You can check out the latest numbers in
our company report.
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Armstrong Flooring 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 the last three years, Armstrong Flooring's
revenue dropped 24% per year. That means its revenue trend is very
weak compared to other loss making companies. With revenue in
decline, the share price decline of 12% per year is hardly
undeserved. It would probably be worth asking whether the company
can fund itself to profitability. The company will need to return
to revenue growth as quickly as possible, if it wants to see some
enthusiasm from investors.
The chart below shows how revenue and earnings
have changed with time, (if you click on the chart you can see the
It's probably worth noting that the CEO is paid
less than the median at similar sized companies. It's always worth
keeping an eye on CEO pay, but a more important question is whether
the company will grow earnings throughout the years. If you are
thinking of buying or selling Armstrong Flooring stock, you should
check out this free report showing analyst
The last twelve months weren't great for
Armstrong Flooring shares, which cost holders 13%, while the market
was up about 3.8%. Of course the long term matters more
than the short term, and even great stocks will sometimes have a
poor year. The three-year loss of 12% per year isn't as bad as the
last twelve months, suggesting that the company has not been able
to convince the market it has solved its problems. 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. Shareholders might want to examine
this detailed historical
graph of past earnings, revenue and cash flow.
We will like Armstrong Flooring better if we see
some big insider buys. While we wait, check out this
free list of growing companies
with considerable, recent, 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
If you spot an error that warrants correction, please contact
the editor at
[email protected] 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.