Those Who Purchased American Pacific Borates (ASX:ABR) Shares A Year Ago Have A 26% Loss To Show For It
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. For example, the American Pacific Borates Limited (ASX:ABR) share price is down 26% in the last year. That's well bellow the market return of -15%. American Pacific Borates hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. It's down 67% in about a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
See our latest analysis for American Pacific Borates
With just AU$146,544 worth of revenue in twelve months, we don't think the market considers American Pacific Borates 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. For example, investors may be hoping that American Pacific Borates finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. There was already a significant chance that they would need more money for business development, and indeed they recently put themselves at the mercy of capital markets and raised 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.
American Pacific Borates only just had cash in excess of all liabilities when it last reported. So it is a good thing that the company has looked to remedy the situation by raising more capital recently. The cash situation might not explain why the share price is down 26% in the last year. The image below shows how American Pacific Borates's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
We doubt American Pacific Borates shareholders are happy with the loss of 26% over twelve months. That falls short of the market, which lost 15%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Notably, the loss over the last year isn't as bad as the 57% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with American Pacific Borates (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
But note: American Pacific Borates may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
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