If You Had Bought Bounty Oil & Gas (ASX:BUY) Stock Five Years Ago, You'd Be Sitting On A 58% Loss, Today
Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. To wit, the Bounty Oil & Gas NL (ASX:BUY) share price managed to fall 58% over five long years. That is extremely sub-optimal, to say the least. Even worse, it's down 17% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 31% in the same time period.
See our latest analysis for Bounty Oil & Gas
With just AU$4,183,937 worth of revenue in twelve months, we don't think the market considers Bounty Oil & Gas to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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. It seems likely some shareholders believe that Bounty Oil & Gas will discover or develop fossil fuel before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Bounty Oil & Gas investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that Bounty Oil & Gas had AU$1.1m more in total liabilities than it had cash, when it last reported in December 2019. That puts it in the highest risk category, according to our analysis. But with the share price diving 16% 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 Bounty Oil & Gas's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the 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
It's good to see that Bounty Oil & Gas has rewarded shareholders with a total shareholder return of 25% in the last twelve months. That certainly beats the loss of about 16% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 4 warning signs for Bounty Oil & Gas (1 can't be ignored!) that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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. Thank you for reading.
