The three-year shareholder returns and company earnings persist lower as Halwani Bros (TADAWUL:6001) stock falls a further 10% in past week

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Halwani Bros. Co. Ltd. (TADAWUL:6001) shareholders have had that experience, with the share price dropping 38% in three years, versus a market decline of about 6.2%. And over the last year the share price fell 21%, so we doubt many shareholders are delighted. Furthermore, it's down 16% in about a quarter. That's not much fun for holders.

Since Halwani Bros has shed ر.س161m 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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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Halwani Bros moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

We think that the revenue decline over three years, at a rate of 5.5% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

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

We know that Halwani Bros has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Halwani Bros

A Different Perspective

We regret to report that Halwani Bros shareholders are down 21% for the year. Unfortunately, that's worse than the broader market decline of 3.1%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Halwani Bros better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Halwani Bros you should know about.

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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 Saudi 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.