Long term investing works well, but it doesn’t always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held Minera Frisco, S.A.B. de C.V. (BMV:MFRISCOA-1) for five whole years – as the share price tanked 84%. And some of the more recent buyers are probably worried, too, with the stock falling 32% in the last year. It’s up 1.2% in the last seven days.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Minera Frisco. de 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Minera Frisco. de saw its revenue increase by 0.5% per year. That’s far from impressive given all the money it is losing. It’s not so sure that share price crash of 30% per year is completely deserved, but the market is doubtless disappointed. While we’re definitely wary of the stock, after that kind of performance, it could be an over-reaction. A company like this generally needs to produce profits before it can find favour with new investors.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Fundamentally, investors are buying a company’s future earnings, but the stability of the business can influence the price they’re willing to pay. For example, we’ve discovered 4 warning signs for Minera Frisco. de (of which 2 are major) which any shareholder or potential investor should be aware of.
A Different Perspective
Investors in Minera Frisco. de had a tough year, with a total loss of 32%, against a market gain of about 6.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 30% 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 might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MX exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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