Strong week for Norstar Holdings (TLV:NSTR) shareholders doesn't alleviate pain of five-year loss

Norstar Holdings Inc (TLV:NSTR) shareholders should be happy to see the share price up 22% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Like a ship taking on water, the share price has sunk 83% in that time. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

While the last five years has been tough for Norstar Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Norstar Holdings

Because Norstar Holdings 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 desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last five years Norstar Holdings saw its revenue shrink by 5.3% per year. While far from catastrophic that is not good. The share price fall of 13% (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. That is not really what the successful investors we know aim for.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Norstar Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We've already covered Norstar Holdings' share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Norstar Holdings' TSR, which was a 80% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 3.1% in the last year, Norstar Holdings shareholders lost 7.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 12% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Norstar Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Norstar Holdings (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

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

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