We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Hello Group Inc. (NASDAQ:MOMO) for five whole years - as the share price tanked 80%. And we doubt long term believers are the only worried holders, since the stock price has declined 38% over the last twelve months. The falls have accelerated recently, with the share price down 12% in the last three months.

On a more encouraging note the company has added US$70m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Hello Group became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. On top of that, revenue has declined by 3.5% per year over the half decade; that could be a red flag for some investors.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Hello Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Hello Group stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hello Group the TSR over the last 5 years was -73%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Hello Group had a tough year, with a total loss of 33% (including dividends), against a market gain of about 23%. 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 12% 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 - Hello Group has 1 warning sign we think you should be aware of.

But note: Hello Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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