Investing in stocks inevitably means buying into some companies that perform poorly.  But the long term shareholders of Liberty Broadband Corporation (NASDAQ:LBRD.K) have had an unfortunate run in the last three years.  Sadly for them, the share price is down 67% in that time.    And the ride hasn't got any smoother in recent times over the last year, with the price 32% lower in that time.     Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days.    We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.  

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine.  By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Although the share price is down over three years, Liberty Broadband actually managed to grow EPS by 35% per year in that time.  Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain).  Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Revenue is actually up 18% over the three years, so the share price drop doesn't seem to hinge on revenue, either.  This analysis is just perfunctory, but it might be worth researching Liberty Broadband more closely, as sometimes stocks fall unfairly. This could present an opportunity.    

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NasdaqGS:LBRD.K Earnings and Revenue Growth May 13th 2024

It is of course excellent to see how Liberty Broadband has grown profits over the years, but the future is more important for shareholders.  Take a more thorough look at Liberty Broadband's financial health with this free report on its balance sheet.

A Different Perspective

Liberty Broadband shareholders are down 32% for the year, but the market itself is up 28%.  However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period.     Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% 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.   Consider for instance, the ever-present spectre of investment risk.   We've identified 3 warning signs with Liberty Broadband (at least 2 which shouldn't be ignored)  , and understanding them should be part of your investment process.  

But note: Liberty Broadband may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.