Shareholders in Hans Energy (HKG:554) have lost 35%, as stock drops 14% this past week

Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Hans Energy Company Limited (HKG:554) shareholders have had that experience, with the share price dropping 35% in three years, versus a market decline of about 17%. The falls have accelerated recently, with the share price down 16% in the last three months. But this could be related to the weak market, which is down 7.8% in the same period.

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

View our latest analysis for Hans Energy

Hans Energy isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last three years, Hans Energy's revenue dropped 54% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 10% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

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

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

A Different Perspective

It's nice to see that Hans Energy shareholders have received a total shareholder return of 18% over the last year. That certainly beats the loss of about 3% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Hans Energy better, we need to consider many other factors. For instance, we've identified 2 warning signs for Hans Energy that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.