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Did Changing Sentiment Drive Mariner's (ASX:MCX) Share Price Down A Painful 74%?

Simply Wall St

While it may not be enough for some shareholders, we think it is good to see the Mariner Corporation Limited (ASX:MCX) share price up 24% in a single quarter. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 74%. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.

See our latest analysis for Mariner

With just AU$397,632 worth of revenue in twelve months, we don't think the market considers Mariner to have proven its business plan. You have to wonder why venture capitalists aren't funding it. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. Investors will be hoping that Mariner can make progress and gain better traction for the business, before it runs low on cash.

Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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 Mariner investors might realise.

Mariner had liabilities exceeding cash by AU$3.2m when it last reported in June 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 23% 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 Mariner's cash levels have changed over time. The image below shows how Mariner's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

ASX:MCX Historical Debt, October 11th 2019

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. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

A Different Perspective

Mariner shareholders are down 6.1% for the year, but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 23% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Mariner 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 AU 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.