If You Had Bought Armstrong Flooring (NYSE:AFI) Stock Three Years Ago, You'd Be Sitting On A 33% Loss, Today

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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See our latest analysis for Armstrong Flooring

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 actual values).

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 profit forecasts.

A Different Perspective

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 qualitative material.

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.