Shareholders in Hillgrove Resources (ASX:HGO) have lost 33%, as stock drops 11% this past week

It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Hillgrove Resources Limited (ASX:HGO) have tasted that bitter downside in the last year, as the share price dropped 33%. That contrasts poorly with the market return of 8.0%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 23% in three years. Furthermore, it's down 26% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Since Hillgrove Resources has shed AU$10m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Hillgrove Resources

Hillgrove Resources wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Hillgrove Resources stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Hillgrove Resources shareholders are down 33% for the year, but the market itself is up 8.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.4% over the last half decade. We realise that Baron Rothschild 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 business. 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. Even so, be aware that Hillgrove Resources is showing 2 warning signs in our investment analysis , you should know about...

We will like Hillgrove Resources better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, 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.