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Those Who Purchased HRL Holdings (ASX:HRL) Shares Three Years Ago Have A 19% Loss To Show For It

Simply Wall St

Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term HRL Holdings Limited (ASX:HRL) shareholders have had that experience, with the share price dropping 19% in three years, versus a market return of about 37%. On the other hand the share price has bounced 6.1% over the last week.

Check out our latest analysis for HRL Holdings

Because HRL Holdings 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last three years, HRL Holdings saw its revenue grow by 45% per year, compound. That's well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 6.9% per year. That seems like an unlucky result for holders. It seems likely that actual growth fell short of shareholders' expectations. Still, with high hopes now tempered, now might prove to be an opportunity to buy.

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

ASX:HRL Income Statement, December 19th 2019
ASX:HRL Income Statement, December 19th 2019

This free interactive report on HRL Holdings's balance sheet strength is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between HRL Holdings's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that HRL Holdings's TSR, at -17% is higher than its share price return of -19%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

HRL Holdings provided a TSR of 8.2% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 3.4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Before spending more time on HRL Holdings it might be wise to click here to see if insiders have been buying or selling shares.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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