Hapvida Participações e Investimentos (BVMF:HAPV3 shareholders incur further losses as stock declines 4.5% this week, taking three-year losses to 81%

As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Hapvida Participações e Investimentos S.A. (BVMF:HAPV3) investors who have held the stock for three years as it declined a whopping 81%. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 34% in a year. Furthermore, it's down 30% in about a quarter. That's not much fun for holders. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Since Hapvida Participações e Investimentos has shed R$824m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Hapvida Participações e Investimentos

Hapvida Participações e Investimentos 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 desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Hapvida Participações e Investimentos grew revenue at 30% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 22% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Hapvida Participações e Investimentos is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Hapvida Participações e Investimentos in this interactive graph of future profit estimates.

A Different Perspective

While the broader market lost about 1.6% in the twelve months, Hapvida Participações e Investimentos shareholders did even worse, losing 34%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. 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. Take risks, for example - Hapvida Participações e Investimentos has 1 warning sign we think you should be aware of.

We will like Hapvida Participações e Investimentos 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 Brazilian 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.