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As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Heidelberg Pharma AG (ETR:HPHA) shareholders have had that experience, with the share price dropping 40% in three years, versus a market decline of about 4.2%. And the ride hasn't got any smoother in recent times over the last year, with the price 25% lower in that time.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Heidelberg Pharma
Because Heidelberg Pharma 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. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last three years, Heidelberg Pharma saw its revenue grow by 16% per year, compound. That's a fairly respectable growth rate. Shareholders have endured a share price decline of 12% per year. This implies the market had higher expectations of Heidelberg Pharma. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Heidelberg Pharma's financial health with this free report on its balance sheet.
A Different Perspective
Heidelberg Pharma shareholders are down 25% for the year, but the market itself is up 18%. 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 1.5% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Heidelberg Pharma better, we need to consider many other factors. For example, we've discovered 3 warning signs for Heidelberg Pharma (2 are a bit unpleasant!) that you should be aware of before investing here.