Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. Imagine if you held Conduent Incorporated (NASDAQ:CNDT) for half a decade as the share price tanked 77%. Even worse, it's down 8.1% in about a month, which isn't fun at all. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
If the past week is anything to go by, investor sentiment for Conduent isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Conduent 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last five years Conduent saw its revenue shrink by 6.2% per year. That's not what investors generally want to see. If a business loses money, you want it to grow, so no surprises that the share price has dropped 12% each year in that time. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. That is not really what the successful investors we know aim for.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Conduent will earn in the future (free profit forecasts).
A Different Perspective
Investors in Conduent had a tough year, with a total loss of 14%, against a market gain of about 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Conduent better, we need to consider many other factors. For instance, we've identified 1 warning sign for Conduent that you should be aware of.
Conduent 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 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.