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Did You Manage To Avoid Cincinnati Bell's (NYSE:CBB) Devastating 78% Share Price Drop?

Simply Wall St

As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Cincinnati Bell Inc. (NYSE:CBB), who have seen the share price tank a massive 78% over a three year period. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 67% in a year. On top of that, the share price has dropped a further 37% in a month.

Check out our latest analysis for Cincinnati Bell

Because Cincinnati Bell is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last three years, Cincinnati Bell saw its revenue grow by 11% per year, compound. That's a pretty good rate of top-line growth. So it seems unlikely the 39% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:CBB Income Statement, October 13th 2019

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Cincinnati Bell

A Different Perspective

Cincinnati Bell shareholders are down 67% for the year, but the market itself is up 8.6%. 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 24% 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. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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 editorial-team@simplywallst.com. 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.