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Easy Come, Easy Go: How Real Estate Investar Group (ASX:REV) Shareholders Got Unlucky And Saw 87% Of Their Cash Evaporate

Simply Wall St

Real Estate Investar Group Limited (ASX:REV) shareholders should be happy to see the share price up 14% in the last week. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 87% in the last three years. So it's about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Check out our latest analysis for Real Estate Investar Group

With just AU$1,070,795 worth of revenue in twelve months, we don't think the market considers Real Estate Investar Group 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). Investors will be hoping that Real Estate Investar Group can make progress and gain better traction for the business, before it runs low on cash.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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). Real Estate Investar Group has already given some investors a taste of the bitter losses that high risk investing can cause.

Our data indicates that Real Estate Investar Group had AU$1.1m more in total liabilities than it had cash, when it last reported in June 2019. That makes it extremely high risk, in our view. But since the share price has dived -49% per year, over 3 years , it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Real Estate Investar Group's cash levels have changed over time. The image below shows how Real Estate Investar Group's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

ASX:REV Historical Debt, October 14th 2019

Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? 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)?

We've already covered Real Estate Investar Group's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Real Estate Investar Group hasn't been paying dividends, but its TSR of -85% exceeds its share price return of -87%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

The last twelve months weren't great for Real Estate Investar Group shares, which cost holders 11%, while the market was up about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 47% per annum loss investors have suffered over the last three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. Before spending more time on Real Estate Investar Group it might be wise to click here to see if insiders have been buying or selling shares.

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 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.