Even after rising 18% this past week, Hexagon Composites (OB:HEX) shareholders are still down 82% over the past five years

It's nice to see the Hexagon Composites ASA (OB:HEX) share price up 18% in a week. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 86% lower after that period. So we don't gain too much confidence from the recent recovery. The fundamental business performance will ultimately determine if the turnaround can be sustained. 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.

While the stock has risen 18% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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Hexagon Composites 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, Hexagon Composites saw its revenue increase by 8.1% per year. That's a fairly respectable growth rate. So the stock price fall of 13% per year seems pretty steep. The market can be a harsh master when your company is losing money and revenue growth disappoints.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We've already covered Hexagon Composites' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Hexagon Composites' TSR of was a loss of 82% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market gained around 13% in the last year, Hexagon Composites shareholders lost 83%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% 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. It's always interesting to track share price performance over the longer term. But to understand Hexagon Composites better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Hexagon Composites , and understanding them should be part of your investment process.

Of course Hexagon Composites may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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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.