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A Look At Ambac Financial Group's (NYSE:AMBC) Share Price Returns

·2 min read

For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Ambac Financial Group, Inc. (NYSE:AMBC) shareholders have had that experience, with the share price dropping 29% in three years, versus a market return of about 63%. The falls have accelerated recently, with the share price down 16% 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years Ambac Financial Group saw its revenue shrink by 42% 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 9% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).


This free interactive report on Ambac Financial Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Ambac Financial Group shareholders gained a total return of 12% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 4% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Ambac Financial Group you should know about.

If you are like me, then you will 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.

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 (at) simplywallst.com.