Did Changing Sentiment Drive Hudson Global’s Share Price Down A Worrying 59%?

Hudson Global, Inc (NASDAQ:HSON) shareholders should be happy to see the share price up 11% in the last quarter. But that doesn’t change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 59% in the period. So we’re not so sure if the recent bounce should be celebrated. Of course, this could be the start of a turnaround.

Check out our latest analysis for Hudson Global

Because Hudson Global is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 half a decade Hudson Global reduced its trailing twelve month revenue by 11% for each year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 16% annually during that time. It’s fair to say most investors don’t like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

NasdaqGS:HSON Income Statement, March 1st 2019
NasdaqGS:HSON Income Statement, March 1st 2019

We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

We’d be remiss not to mention the difference between Hudson Global’s total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Hudson Global’s TSR of was a loss of 57% for the 5 years. That wasn’t as bad as its share price return, because it has paid dividends.

A Different Perspective

Hudson Global shareholders are down 21% for the year, but the market itself is up 5.0%. 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 16% per year over five years. We realise that Buffett 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 businesses. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course Hudson Global may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.