Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Infinera Corporation (NASDAQ:INFN) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 52% drop in the share price over that period. The more recent news is of little comfort, with the share price down 34% in a year. Furthermore, it's down 31% in about a quarter. That's not much fun for holders.
After losing 9.2% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for Infinera
Infinera wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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 three years, Infinera grew revenue at 6.6% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 15% during the period. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. After all, growing a business isn't easy, and the process will not always be smooth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Infinera is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Infinera in this interactive graph of future profit estimates.
A Different Perspective
Infinera shareholders are down 34% for the year, but the market itself is up 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Infinera is showing 1 warning sign in our investment analysis , you should know about...
Of course Infinera may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
