Further weakness as Dr. Hönle (ETR:HNL) drops 10% this week, taking five-year losses to 69%

We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. Zooming in on an example, the Dr. Hönle AG (ETR:HNL) share price dropped 71% in the last half decade. That's an unpleasant experience for long term holders. The falls have accelerated recently, with the share price down 25% in the last three months.

Since Dr. Hönle has shed €11m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Dr. Hönle

Dr. Hönle 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 half decade, Dr. Hönle saw its revenue increase by 0.5% per year. That's far from impressive given all the money it is losing. 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. A company like this generally needs to produce profits before it can find favour with new investors.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Dr. Hönle's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Dr. Hönle had a tough year, with a total loss of 14%, against a market gain of about 6.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 11% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Dr. Hönle better, we need to consider many other factors. For example, we've discovered 1 warning sign for Dr. Hönle that you should be aware of before investing here.

Of course Dr. Hönle may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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