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Did You Manage To Avoid Huttig Building Products' (NASDAQ:HBP) Devastating 84% Share Price Drop?

Over the last month the Huttig Building Products, Inc. (NASDAQ:HBP) has been much stronger than before, rebounding by 77%. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 84% in the last three years. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Check out our latest analysis for Huttig Building Products

Given that Huttig Building Products didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years, Huttig Building Products saw its revenue grow by 5.6% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. Nonetheless, it's fair to say the rapidly declining share price (down 46%, compound, over three years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NasdaqCM:HBP Income Statement May 3rd 2020
NasdaqCM:HBP Income Statement May 3rd 2020

Take a more thorough look at Huttig Building Products's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 3.8% in the twelve months, Huttig Building Products shareholders did even worse, losing 57%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 20% over the last half decade. We realise that Baron Rothschild 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 business. 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. Even so, be aware that Huttig Building Products is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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.

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. Thank you for reading.

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