The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the HolidayCheck Group AG (ETR:HOC) share price is down 32% in the last year. That contrasts poorly with the market return of -7.7%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 5.7% in three years. But it’s up 5.5% in the last week.
HolidayCheck 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 year HolidayCheck Group saw its revenue grow by 7.7%. That’s not a very high growth rate considering it doesn’t make profits. Given this fairly low revenue growth (and lack of profits), it’s not particularly surprising to see the stock down 32% in a year. It’s important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
Take a more thorough look at HolidayCheck Group’s financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that HolidayCheck Group shareholders are down 31% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 7.7%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 2.7% per year over five years. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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 DE exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.