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Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. To wit, the HOV Services Limited (NSE:HOVS) share price managed to fall 64% over five long years. That is extremely sub-optimal, to say the least. And it's not just long term holders hurting, because the stock is down 64% in the last year. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.
Check out our latest analysis for HOV Services
We don't think that HOV Services's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last five years HOV Services saw its revenue shrink by 5.0% per year. While far from catastrophic that is not good. The share price decline of 19% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. We don't think anyone is rushing to buy this stock. Ultimately, it may be worth watching - should revenue pick up, the share price might follow.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling HOV Services stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 9.5% in the last year, HOV Services shareholders lost 64%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 19% over the last half decade. We realise that Buffett 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 businesses. You could get a better understanding of HOV Services's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: HOV Services 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).