Yahoo Finance Did Changing Sentiment Drive Altai Resources's (CVE:ATI) Share Price Down A Worrying 59%?
Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of Altai Resources Inc. (CVE:ATI) have suffered share price declines over the last year. To wit the share price is down 59% in that time. At least the damage isn't so bad if you look at the last three years, since the stock is down 8.3% in that time. Furthermore, it's down 21% in about a quarter. That's not much fun for holders.
View our latest analysis for Altai Resources
With just CA$239,321 worth of revenue in twelve months, we don't think the market considers Altai Resources to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Altai Resources will discover or develop fossil fuel before too long.
Companies that lack both meaningful revenue and profits are usually considered 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). Altai Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Altai Resources has plenty of cash in the bank, with cash in excess of all liabilities sitting at CA$3.4m, when it last reported (June 2019). That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 59% in the last year , it could be that the price was previously too hyped up. The image below shows how Altai Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how Altai Resources's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Altai Resources's total shareholder return (TSR) and its share price change, which we've covered above. 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. We note that Altai Resources's TSR, at -59% is higher than its share price return of -59%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Investors in Altai Resources had a tough year, with a total loss of 59%, against a market gain of about 8.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. If you would like to research Altai Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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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.
