Yahoo Finance Some Altima Resources (CVE:ARH) Shareholders Have Copped A 98% Share Price Wipe Out
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Altima Resources Ltd. (CVE:ARH) shareholders will doubtless be very grateful to see the share price up 33% in the last quarter. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Like a ship taking on water, the share price has sunk 98% in that time. So we don't gain too much confidence from the recent recovery. The million dollar question is whether the company can justify a long term recovery.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for Altima Resources
With just CA$207,187 worth of revenue in twelve months, we don't think the market considers Altima Resources to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Altima Resources will discover or develop fossil fuel before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). It certainly is a dangerous place to invest, as Altima Resources investors might realise.
Our data indicates that Altima Resources had CA$3,012,073 more in total liabilities than it had cash, when it last reported in February 2019. That puts it in the highest risk category, according to our analysis. But with the share price diving 54% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Altima Resources's cash levels have changed over time. You can click on the image below to see (in greater detail) how Altima Resources's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market gained around 0.4% in the last year, Altima Resources shareholders lost 60%. 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 54% over the last half decade. We realise that Buffett 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 businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
