Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Angi Inc. (NASDAQ:ANGI) for half a decade as the share price tanked 87%. And some of the more recent buyers are probably worried, too, with the stock falling 43% in the last year. Furthermore, it's down 31% in about a quarter. That's not much fun for holders. 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.
Since Angi has shed US$115m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Angi wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over five years, Angi grew its revenue at 4.2% per year. That's far from impressive given all the money it is losing. Nonetheless, it's fair to say the rapidly declining share price (down 13%, compound, over five years) suggests the market is very disappointed with this level of growth. We'd be pretty cautious about this one, although the sell-off may be too severe. A company like this generally needs to produce profits before it can find favour with new investors.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market gained around 24% in the last year, Angi shareholders lost 43%. 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 13% 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 Angi's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com