The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Ambac Financial Group, Inc. (NYSE:AMBC) has fallen short of that second goal, with a share price rise of 33% over five years, which is below the market return. The last year has been disappointing, with the stock price down 30% in that time.
Because Ambac Financial Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 5 years Ambac Financial Group saw its revenue shrink by 17% per year. The stock is only up 6% for each year during the period. Arguably that's not bad given the soft revenue and loss-making position. We'd keep an eye on changes in the trend - there may be an opportunity if the company returns to growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Ambac Financial Group shareholders are down 30% for the year, but the market itself is up 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Ambac Financial Group better, we need to consider many other factors. For example, we've discovered 1 warning sign for Ambac Financial Group that you should be aware of before investing here.
We will like Ambac Financial Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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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. 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.
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