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It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Community Health Systems, Inc. (NYSE:CYH) investors who have held the stock for three years as it declined a whopping 79%. That would be a disturbing experience. Shareholders have had an even rougher run lately, with the share price down 50% in the last 90 days.
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.
Check out our latest analysis for Community Health Systems
Community Health Systems isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Community Health Systems grew revenue at 0.6% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. But the share price crash at 21% per year does seem a bit harsh! While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Before considering a purchase, take a look at the losses the company is racking up.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Community Health Systems' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Community Health Systems shareholders are down 13% for the year, but the market itself is up 27%. 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 5% 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. For instance, we've identified 2 warning signs for Community Health Systems that you should be aware of.