Investors are understandably disappointed when a stock they own declines in value. But it can difficult to make money in a declining market. While the ISP Holdings Limited (HKG:2340) share price is down 75% in the last three years, the total return to shareholders (which includes dividends) was 18%. And that total return actually beats the market decline of 2.1%. The last week also saw the share price slip down another 18%.
After losing 18% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for ISP Holdings
ISP Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over the last three years, ISP Holdings' revenue dropped 23% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 20% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling ISP Holdings stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered ISP Holdings' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that ISP Holdings' TSR of 18% over the last 3 years is better than the share price return.
A Different Perspective
Investors in ISP Holdings had a tough year, with a total loss of 15%, against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 20% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 1 warning sign for ISP Holdings that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.