Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Hostelworld Group plc (LON:HSW) during the five years that saw its share price drop a whopping 79%. Furthermore, it's down 20% in about a quarter. That's not much fun for holders.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Hostelworld Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 Hostelworld Group saw its revenue shrink by 30% per year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 12% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Hostelworld Group stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered Hostelworld Group's 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. Dividends have been really beneficial for Hostelworld Group shareholders, and that cash payout explains why its total shareholder loss of 76%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Hostelworld Group shareholders are down 9.2% over twelve months, which isn't far from the market return of -9.3%. Worse still, the company has lost shareholders 12% per year over five years. It could well be that the business has begun to stabilize, although we'd be hesitant to buy without clear information suggesting the company will grow. It's always interesting to track share price performance over the longer term. But to understand Hostelworld Group better, we need to consider many other factors. For instance, we've identified 2 warning signs for Hostelworld Group (1 doesn't sit too well with us) that you should be aware of.
But note: Hostelworld Group 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 GB 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.
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