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The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But MBIA Inc. (NYSE:MBI) has fallen short of that second goal, with a share price rise of 43% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 32% in the last year.
MBIA 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last half decade MBIA's revenue has actually been trending down at about 16% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 7% per year over that time. That's pretty decent given the top line decline, and lack of profits. We'd keep an eye on changes in the trend - there may be an opportunity if the company returns to growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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 MBIA
A Different Perspective
MBIA shareholders are up 32% for the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 7% per year over five year. It is possible that returns will improve along with the business fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with MBIA (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
MBIA is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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.
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