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Ambac Financial Group (NYSE:AMBC) Share Prices Have Dropped 26% In The Last Three Years

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Simply Wall St
·3 min read
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Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Ambac Financial Group, Inc. (NYSE:AMBC) shareholders have had that experience, with the share price dropping 26% in three years, versus a market return of about 35%. And over the last year the share price fell 24%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 14% in the last three months.

View our latest analysis for Ambac Financial Group

Ambac Financial Group 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.

In the last three years Ambac Financial Group saw its revenue shrink by 20% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 8.1% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

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

A Different Perspective

While the broader market gained around 7.6% in the last year, Ambac Financial Group shareholders lost 24%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.1% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Ambac Financial Group (1 is a bit concerning) that you should be aware of.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.