It is doubtless a positive to see that the Sequans Communications S.A. (NYSE:SQNS) share price has gained some 90% in the last three months. But that doesn’t change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 54% in that time. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.
Sequans Communications isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. 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.
In the last three years Sequans Communications saw its revenue shrink by 17% per year. That’s definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 23% (annualized) in the same time period. Bagholders or ‘baggies’ are people who buy more of a stock as the price collapses. They are then left ‘holding the bag’ if the shares turn out to be worthless. It could be a while before the company repays long suffering shareholders with share price gains.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Sequans Communications stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It’s good to see that Sequans Communications has rewarded shareholders with a total shareholder return of 25% in the last twelve months. Notably the five-year annualised TSR loss of 2.7% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we’ve spotted with Sequans Communications .
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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