Investing in stocks inevitably means buying into some companies that perform poorly. But long term Ribbon Communications Inc. (NASDAQ:RBBN) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 52% in that time. And more recent buyers are having a tough time too, with a drop of 34% in the last year. Even worse, it's down 12% in about a month, which isn't fun at all.
Because Ribbon Communications 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Ribbon Communications grew revenue at 27% per year. That's well above most other pre-profit companies. In contrast, the share price is down 15% compound, over three years - disappointing by most standards. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.
You can see below how earnings and revenue have changed over time (discover 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. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market gained around 18% in the last year, Ribbon Communications shareholders lost 34%. 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 6.8% 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. It's always interesting to track share price performance over the longer term. But to understand Ribbon Communications better, we need to consider many other factors. Even so, be aware that Ribbon Communications is showing 3 warning signs in our investment analysis , you should know about...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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