For your setup and a good shooter, I'd expect 1 to 1.5 inch groups at 50 yards. As said previously, A S&W AR, 55gr FMJ ammo, and red dot sights are suited for speed, price, and adequate precision. Use 5 round shot groups to get a better idea of your precision. 3 round groups allow for too much variability.
I don't know what your shooting experience is, but I'd guess it's shooter error. Rifle shooting involves a lot more than just putting the dot on the target and pressing the trigger. There's the different shooting fundamentals, flinch, follow through, parallax, consistency, barrel break in, etc. To become a proficient shooter requires classes, coaching, and thousands of rounds of practice to get the maximum accuracy out of a rifle.
It could also be the wind. A strong crosswind can shift your impacts by up to 2 inches at 50 yards and create a horizontal oval.
Eyesight could be a factor. I have astigmatism which makes my red dot look more like a blob.