Optimism around First Majestic Silver (TSE:FR) delivering new earnings growth may be shrinking as stock declines 9.1% this past week

Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of First Majestic Silver Corp. (TSE:FR) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 55%. On the other hand, the stock is actually up 11% over three years. The falls have accelerated recently, with the share price down 42% in the last three months.

Since First Majestic Silver has shed US$263m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for First Majestic Silver

Given that First Majestic Silver only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last year First Majestic Silver saw its revenue grow by 69%. That's well above most other pre-profit companies. Meanwhile, the share price slid 55%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling First Majestic Silver stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market gained around 1.3% in the last year, First Majestic Silver shareholders lost 55% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand First Majestic Silver better, we need to consider many other factors. Even so, be aware that First Majestic Silver is showing 4 warning signs in our investment analysis , you should know about...

First Majestic Silver is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

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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.