Further weakness as Heidelberg Pharma (ETR:HPHA) drops 11% this week, taking one-year losses to 46%

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Heidelberg Pharma AG (ETR:HPHA) shareholders over the last year, as the share price declined 46%. That's disappointing when you consider the market returned 9.8%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 15% in three years. The falls have accelerated recently, with the share price down 22% in the last three months. Of course, this share price action may well have been influenced by the 10% decline in the broader market, throughout the period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Heidelberg Pharma

Because Heidelberg Pharma 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 expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In just one year Heidelberg Pharma saw its revenue fall by 42%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 46% in that time. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

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

Take a more thorough look at Heidelberg Pharma's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 9.8% in the last year, Heidelberg Pharma shareholders lost 46%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Heidelberg Pharma (of which 1 is significant!) you should know about.

But note: Heidelberg Pharma may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.