Investors in HC2 Holdings (NYSE:HCHC) have unfortunately lost 37% over the last three years
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term HC2 Holdings, Inc. (NYSE:HCHC) shareholders, since the share price is down 37% in the last three years, falling well short of the market return of around 64%. But it's up 6.7% in the last week. We would posit that the recently released financial results have driven this rise, so you might want to check the latest numbers in our full company report.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for HC2 Holdings
HC2 Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, HC2 Holdings' revenue dropped 35% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 11% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of HC2 Holdings' earnings, revenue and cash flow.
A Different Perspective
HC2 Holdings provided a TSR of 36% over the year. That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 3% over the last five years. While 'turnarounds seldom turn' there are green shoots for HC2 Holdings. 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. Case in point: We've spotted 2 warning signs for HC2 Holdings you should be aware of.
HC2 Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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