If You Had Bought Community Health Systems (NYSE:CYH) Stock Five Years Ago, You'd Be Sitting On A 85% Loss, Today
It is a pleasure to report that the Community Health Systems, Inc. (NYSE:CYH) is up 127% in the last quarter. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Five years have seen the share price descend precipitously, down a full 85%. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for Community Health Systems
Community Health Systems 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over half a decade Community Health Systems reduced its trailing twelve month revenue by 9.2% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 32% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
The graphic below depicts how earnings and revenue have changed over time (unveil 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. This free report showing analyst forecasts should help you form a view on Community Health Systems
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Community Health Systems's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Community Health Systems's TSR, at -82% is higher than its share price return of -85%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
It's nice to see that Community Health Systems shareholders have received a total shareholder return of 60% over the last year. That certainly beats the loss of about 29% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 3 warning signs for Community Health Systems you should be aware of.
Community Health Systems 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 US exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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