Further weakness as HITIQ (ASX:HIQ) drops 14% this week, taking one-year losses to 56%

Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of HITIQ Limited (ASX:HIQ) have suffered share price declines over the last year. The share price is down a hefty 69% in that time. Because HITIQ hasn't been listed for many years, the market is still learning about how the business performs.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for HITIQ

HITIQ isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year HITIQ saw its revenue grow by 83%. That's a strong result which is better than most other loss making companies. Meanwhile, the share price slid 69%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between HITIQ's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that HITIQ's TSR, at -56% is higher than its share price return of -69%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

While HITIQ shareholders are down 56% for the year, the market itself is up 6.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 14%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 7 warning signs with HITIQ (at least 6 which are significant) , and understanding them should be part of your investment process.

HITIQ is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.