The three-year earnings decline has likely contributed toErnest Borel Holdings' (HKG:1856) shareholders losses of 38% over that period

As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Ernest Borel Holdings Limited (HKG:1856) shareholders, since the share price is down 38% in the last three years, falling well short of the market return of around 76%. Even worse, it's down 23% in about a month, which isn't fun at all.

Since Ernest Borel Holdings has shed HK$97m 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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Given that Ernest Borel Holdings didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 the last three years, Ernest Borel Holdings' revenue dropped 12% per year. That is not a good result. The annual decline of 11% per year in that period has clearly disappointed holders. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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. Dive deeper into the earnings by checking this interactive graph of Ernest Borel Holdings' earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 43% in the last year, Ernest Borel Holdings shareholders lost 16%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% 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. It's always interesting to track share price performance over the longer term. But to understand Ernest Borel Holdings better, we need to consider many other factors. Even so, be aware that Ernest Borel Holdings is showing 3 warning signs in our investment analysis , and 2 of those are significant...

Ernest Borel Holdings is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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