Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. We don’t wish catastrophic capital loss on anyone. Spare a thought for those who held Frontier Communications Corporation (NASDAQ:FTR) for five whole years – as the share price tanked 99%. And we doubt long term believers are the only worried holders, since the stock price has declined 72% over the last twelve months. The falls have accelerated recently, with the share price down 27% in the last three months.
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.
Given that Frontier Communications didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Frontier Communications saw its revenue increase by 13% per year. That’s a pretty good rate for a long time period. So it is unexpected to see the stock down 62% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Frontier Communications’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Frontier Communications shareholders are down 72% for the year, but the market itself is up 29%. 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 60% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 4 warning signs for Frontier Communications which any shareholder or potential investor should be aware of.
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 US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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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