This month, we saw the Bombardier Inc. (TSE:BBD.B) up an impressive 32%. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 49% in that half decade.
Because Bombardier is loss-making, 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 half a decade Bombardier reduced its trailing twelve month revenue by 5.1% for each year. While far from catastrophic that is not good. The stock hasn't done well for shareholders in the last five years, falling 13%, annualized. But it doesn't surprise given the falling revenue. Without profits, its hard to see how shareholders win if the revenue keeps falling.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Bombardier is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Bombardier will earn in the future (free analyst consensus estimates)
A Different Perspective
Bombardier shareholders are down 17% for the year, but the market itself is up 10%. 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 13% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Bombardier may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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