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Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Doriemus Plc (ASX:DOR) share price slid 45% over twelve months. That falls noticeably short of the market decline of around 3.2%. On the other hand, the stock is actually up 42% over three years. Furthermore, it's down 19% in about a quarter. That's not much fun for holders.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
With zero revenue generated over twelve months, we don't think that Doriemus has proved its business plan yet. 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. For example, they may be hoping that Doriemus finds fossil fuels with an exploration program, before it runs out of money.
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 to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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.
Doriemus has plenty of cash in the bank, with cash in excess of all liabilities sitting at AU$3.3m, when it last reported (December 2021). That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 45% in the last year , it could be that the price was previously too hyped up. You can see in the image below, how Doriemus' 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. 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. You can click here to see if there are insiders selling.
What about the Total Shareholder Return (TSR)?
We've already covered Doriemus' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Doriemus' TSR, at -25% is higher than its share price return of -45%. 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
Doriemus shareholders are down 25% for the year, but the broader market is up 3.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Investors are up over three years, booking 25% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. To that end, you should learn about the 4 warning signs we've spotted with Doriemus (including 3 which are concerning) .
We will like Doriemus better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.