Further weakness as HLS Therapeutics (TSE:HLS) drops 12% this week, taking five-year losses to 71%

Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Imagine if you held HLS Therapeutics Inc. (TSE:HLS) for half a decade as the share price tanked 72%. Even worse, it's down 14% in about a month, which isn't fun at all.

Since HLS Therapeutics has shed CA$21m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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Because HLS Therapeutics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. 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.

In the last half decade, HLS Therapeutics saw its revenue increase by 0.7% per year. That's not a very high growth rate considering it doesn't make profits. It's not so sure that share price crash of 11% per year is completely deserved, but the market is doubtless disappointed. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.

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. This free report showing analyst forecasts should help you form a view on HLS Therapeutics

A Different Perspective

It's good to see that HLS Therapeutics has rewarded shareholders with a total shareholder return of 46% in the last twelve months. Notably the five-year annualised TSR loss of 11% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand HLS Therapeutics better, we need to consider many other factors. Even so, be aware that HLS Therapeutics is showing 1 warning sign in our investment analysis , you should know about...

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