As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Hallmark Financial Services, Inc. (NASDAQ:HALL); the share price is down a whopping 75% in the last three years. That would be a disturbing experience. And over the last year the share price fell 31%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 28% in the last three months. But this could be related to the weak market, which is down 11% in the same period.
Since Hallmark Financial Services has shed US$6.5m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Because Hallmark Financial Services 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last three years, Hallmark Financial Services' revenue dropped 1.4% per year. That is not a good result. Having said that the 20% annualized share price decline highlights the risk of investing in unprofitable companies. We're generally averse to companies with declining revenues, but we're not alone in that. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Hallmark Financial Services will earn in the future (free profit forecasts).
A Different Perspective
We regret to report that Hallmark Financial Services shareholders are down 31% for the year. Unfortunately, that's worse than the broader market decline of 9.0%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. 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. 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. For instance, we've identified 2 warning signs for Hallmark Financial Services that you should be aware of.
Hallmark Financial Services is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.