Ambac Financial Group (NYSE:AMBC investor five-year losses grow to 44% as the stock sheds US$58m this past week

For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Ambac Financial Group, Inc. (NYSE:AMBC), since the last five years saw the share price fall 44%. We also note that the stock has performed poorly over the last year, with the share price down 25%. And the share price decline continued over the last week, dropping some 9.2%.

Since Ambac Financial Group has shed US$58m 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 Ambac Financial Group

Ambac Financial Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope 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, Ambac Financial Group saw its revenue increase by 6.8% per year. That's a fairly respectable growth rate. We doubt many shareholders are ok with the fact the share price has fallen 7% each year for half a decade. Clearly, the expectations from back then have not been satisfied. There is always a big risk of losing money yourself when you buy shares in a company that loses money.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Ambac Financial Group in this interactive graph of future profit estimates.

A Different Perspective

Investors in Ambac Financial Group had a tough year, with a total loss of 25%, against a market gain of about 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% 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. Even so, be aware that Ambac Financial Group is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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