Strong week for Highlight Event and Entertainment (VTX:HLEE) shareholders doesn’t alleviate pain of three-year loss

Highlight Event and Entertainment AG (VTX:HLEE) has rebounded strongly over the last week, with the share price soaring 38%. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 72%. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.

On a more encouraging note the company has added CHF26m to its market cap in just the last 7 days, so let’s see if we can determine what’s driven the three-year loss for shareholders.

See our latest analysis for Highlight Event and Entertainment

Highlight Event and Entertainment isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

Over the last three years, Highlight Event and Entertainment’s revenue dropped 7.9% per year. That is not a good result. The share price fall of 20% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. This business clearly needs to grow revenues if it is to perform as investors hope. There’s no more than a snowball’s chance in hell that share price will head back to its old highs, in the short term.

You can see below how earnings and revenue have changed over time (discover 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.

Investors in Highlight Event and Entertainment had a tough year, with a total loss of 32%, against a market gain of about 9.2%. 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 10% 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. 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. Take risks, for example – Highlight Event and Entertainment has 2 warning signs we think you should be aware of.

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