It's been a soft week for Research Frontiers Incorporated (NASDAQ:REFR) shares, which are down 11%. On the other hand the share price is higher than it was three years ago. In that time, it is up 60%, which isn't bad, but not amazing either.
While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Given that Research Frontiers didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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 3 years Research Frontiers saw its revenue shrink by 21% per year. The modest share price gain of 17% per year suggests holders are sanguine about the falling revenue. As a general rule we don't like it when a loss-making company isn't even growing revenue.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Research Frontiers' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market gained around 30% in the last year, Research Frontiers shareholders lost 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Research Frontiers better, we need to consider many other factors. Even so, be aware that Research Frontiers is showing 3 warning signs in our investment analysis , you should know about...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.
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.
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