It is doubtless a positive to see that the Bombardier Inc. (TSE:BBD.B) share price has gained some 53% in the last three months. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 81% in the last three years. So it sure is nice to see a bit of an improvement. Only time will tell if the company can sustain the turnaround.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Because Bombardier made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, Bombardier's revenue dropped 27% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 22%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Bombardier is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's nice to see that Bombardier shareholders have received a total shareholder return of 76% over the last year. That certainly beats the loss of about 9% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Even so, be aware that Bombardier is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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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