Shareholders in Holmes Place International (TLV:HLMS) have lost 18%, as stock drops 10% this past week

Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Holmes Place International Ltd. (TLV:HLMS) shareholders have had that experience, with the share price dropping 18% in three years, versus a market return of about 64%. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Since Holmes Place International has shed ₪35m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Holmes Place International

Holmes Place International 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, Holmes Place International's revenue dropped 26% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 6% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. 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 graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at Holmes Place International's financial health with this free report on its balance sheet.

A Different Perspective

Holmes Place International shareholders are down 8.3% for the year, but the broader market is up 32%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 6% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Take risks, for example - Holmes Place International has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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