Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the MBIA Inc. (NYSE:MBI) share price slid 32% over twelve months. That’s disappointing when you consider the market returned 25%. However, the longer term returns haven’t been so bad, with the stock down 15% in the last three years. The last week also saw the share price slip down another 8.9%.
Check out our latest analysis for MBIA
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. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
MBIA’s revenue didn’t grow at all in the last year. In fact, it fell 27%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 32% in that time. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on MBIA
A Different Perspective
MBIA shareholders are down 32% for the year, but the market itself is up 25%. 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 1.2% per year over five years. We realise that Baron Rothschild 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 business. 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. For example, we’ve discovered 1 warning sign for MBIA that you should be aware of before investing here.
MBIA is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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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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