Shareholders in Highlight Communications (ETR:HLG) have lost 72%, as stock drops 18% this past week

While it may not be enough for some shareholders, we think it is good to see the Highlight Communications AG (ETR:HLG) share price up 27% in a single quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Indeed, the share price is down a whopping 72% in that time. So we don't gain too much confidence from the recent recovery. The fundamental business performance will ultimately determine if the turnaround can be sustained.

If the past week is anything to go by, investor sentiment for Highlight Communications isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Highlight Communications

Highlight Communications isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good 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.

Over half a decade Highlight Communications reduced its trailing twelve month revenue by 2.5% for each year. While far from catastrophic that is not good. The share price fall of 11% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. Fear of becoming a 'bagholder' may be keeping people away from this stock.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Highlight Communications shareholders are down 52% for the year, but the market itself is up 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Highlight Communications better, we need to consider many other factors. Even so, be aware that Highlight Communications is showing 3 warning signs in our investment analysis , and 2 of those are significant...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.