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Investing in stocks comes with the risk that the share price will fall. And unfortunately for Finance Of America Companies Inc. (NYSE:FOA) shareholders, the stock is a lot lower today than it was a year ago. In that relatively short period, the share price has plunged 68%. Because Finance Of America Companies hasn't been listed for many years, the market is still learning about how the business performs. The falls have accelerated recently, with the share price down 16% in the last three months. But this could be related to the weak market, which is down 6.5% in the same period.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Finance Of America Companies 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.
Finance Of America Companies' revenue didn't grow at all in the last year. In fact, it fell 3.6%. That looks pretty grim, at a glance. In the absence of profits, it's not unreasonable that the share price fell 68%. Fingers crossed this is the low ebb for the stock. We don't generally like to own companies with falling revenues and no profits, so we're pretty cautious of this one, at the moment.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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. You can see what analysts are predicting for Finance Of America Companies in this interactive graph of future profit estimates.
A Different Perspective
While Finance Of America Companies shareholders are down 68% for the year, the market itself is up 4.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 16%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Case in point: We've spotted 1 warning sign for Finance Of America Companies you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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. 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.