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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term High Arctic Energy Services Inc (TSE:HWO) shareholders, since the share price is down 85% in the last three years, falling well short of the market return of around 20%. 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.
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.
See our latest analysis for High Arctic Energy Services
Given that High Arctic Energy Services 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. Shareholders of unprofitable companies usually desire strong 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 High Arctic Energy Services saw its revenue shrink by 15% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 23%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on High Arctic Energy Services' balance sheet strength is a great place to start, if you want to investigate the stock further.
What About The Total Shareholder Return (TSR)?
We've already covered High Arctic Energy Services' share price action, but we should also mention its total shareholder return (TSR). 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. High Arctic Energy Services' TSR of was a loss of 46% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.