Imagine Owning Sailfish Royalty (CVE:FISH) And Wondering If The 27% Share Price Slide Is Justified
Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Sailfish Royalty Corp. (CVE:FISH) shareholders over the last year, as the share price declined 27%. That falls noticeably short of the market decline of around 17%. Sailfish Royalty hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The good news is that the stock is up 4.8% in the last week.
See our latest analysis for Sailfish Royalty
We don't think Sailfish Royalty's revenue of US$124,231 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Sailfish Royalty will find or develop a valuable new mine 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.
Sailfish Royalty had liabilities exceeding cash by US$11m when it last reported in December 2019, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 27% in the last year , 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 Sailfish Royalty'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
We doubt Sailfish Royalty shareholders are happy with the loss of 27% over twelve months. That falls short of the market, which lost 17%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 1.1% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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 instance, we've identified 5 warning signs for Sailfish Royalty (2 are significant) that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.
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