Further weakness as Frequency Electronics (NASDAQ:FEIM) drops 14% this week, taking three-year losses to 49%

Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Frequency Electronics, Inc. (NASDAQ:FEIM) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 31%. And the ride hasn't got any smoother in recent times over the last year, with the price 38% lower in that time. Furthermore, it's down 26% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 15% in the same period.

Since Frequency Electronics has shed US$9.6m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Frequency Electronics

Because Frequency Electronics 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Frequency Electronics grew revenue at 4.0% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. Indeed, the stock dropped 14% over the last three years. If revenue growth accelerates, we might see the share price bounce. But ultimately the key will be whether the company can become profitability.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Frequency Electronics stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 18% in the twelve months, Frequency Electronics shareholders did even worse, losing 38%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Frequency Electronics better, we need to consider many other factors. Take risks, for example - Frequency Electronics has 1 warning sign we think you 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.

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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.