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Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Frontier Communications Corporation (NASDAQ:FTR) for half a decade as the share price tanked 98%. We also note that the stock has performed poorly over the last year, with the share price down 67%. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.
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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
Over five years, Frontier Communications grew its revenue at 16% per year. That’s better than most loss-making companies. So it’s not at all clear to us why the share price sunk 54% throughout that time. It could be that the stock was over-hyped before. While there might be an opportunity here, you’d want to take a close look at the balance sheet strength.
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
Investors in Frontier Communications had a tough year, with a total loss of 67%, against a market gain of about 7.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 50% over the last half decade. 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.
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.
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.