It is a pleasure to report that the Forterra, Inc. (NASDAQ:FRTA) is up 37% in the last quarter. But in truth the last year hasn't been good for the share price. In fact the stock is down 20% in the last year, well below the market return.
Forterra isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Forterra's revenue didn't grow at all in the last year. In fact, it fell 2.4%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 20% in that time. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Given that the market gained 3.8% in the last year, Forterra shareholders might be miffed that they lost 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 37%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. 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.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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