It is doubtless a positive to see that the Ribbon Communications Inc. (NASDAQ:RBBN) share price has gained some 69% in the last three months. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 61% in that period. So it's good to see it climbing back up. After all, could be that the fall was overdone.

On a more encouraging note the company has added US$64m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Given that Ribbon Communications didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years Ribbon Communications saw its revenue shrink by 1.7% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 17% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Ribbon Communications will earn in the future (free profit forecasts).

A Different Perspective

Investors in Ribbon Communications had a tough year, with a total loss of 22%, against a market gain of about 23%. 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 6% 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. Even so, be aware that Ribbon Communications is showing 2 warning signs in our investment analysis , and 1 of those is significant...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.