Frontier Communications Corporation (NASDAQ:FTR) shareholders should be happy to see the share price up 10% in the last month. But that doesn’t change the fact that the returns over the last half decade have been stomach churning. Indeed, the share price is down a whopping 99% in that time. While the recent increase might be a green shoot, we’re certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Frontier Communications isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect 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, Frontier Communications saw its revenue increase by 14% per year. That’s a pretty good rate for a long time period. So the stock price fall of 60% per year seems pretty steep. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
You can see below how revenue has changed over time.
Frontier Communications is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Frontier Communications in this interactive graph of future profit estimates.
A Different Perspective
While the broader market gained around 3.7% in the last year, Frontier Communications shareholders lost 87%. 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 57% per year over five years. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.