Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of underperformance. For example, the Auction Technology Group plc (LON:ATG) share price is down 36% in the last year. That falls noticeably short of the market decline of around 0.6%. Auction Technology Group hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time.
Given the past week has been tough on shareholders, let’s investigate the fundamentals and see what we can learn.
View our latest analysis for Auction Technology Group
Auction Technology 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Auction Technology Group grew its revenue by 71% over the last year. That’s a strong result which is better than most other loss making companies. The share price drop of 36% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven’t evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Auction Technology Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Given that the market gained 0.6% in the last year, Auction Technology Group shareholders might be miffed that they lost 36%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 7.5% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Auction Technology Group it might be wise to click here to see if insiders have been buying or selling shares.
But note: Auction Technology 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).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Valuation is complex, but we’re helping make it simple.
Find out whether Auction Technology Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
View the Free Analysis
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.