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Those Who Purchased Xtract Resources (LON:XTR) Shares Five Years Ago Have A 97% Loss To Show For It

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Simply Wall St
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It is a pleasure to report that the Xtract Resources Plc (LON:XTR) is up 59% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Five years have seen the share price descend precipitously, down a full 97%. So we don't gain too much confidence from the recent recovery. The real question is whether the business can leave its past behind and improve itself over the years ahead.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Check out our latest analysis for Xtract Resources

Xtract Resources recorded just UK£892,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Xtract Resources will find or develop a valuable new mine before too long.

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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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). It certainly is a dangerous place to invest, as Xtract Resources investors might realise.

Our data indicates that Xtract Resources had UK£88,000 more in total liabilities than it had cash, when it last reported in December 2018. That makes it extremely high risk, in our view. But since the share price has dived -51% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Xtract Resources's cash levels have changed over time (click to see the values). You can see in the image below, how Xtract Resources's cash levels have changed over time (click to see the values).

AIM:XTR Historical Debt, August 7th 2019
AIM:XTR Historical Debt, August 7th 2019

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

It's nice to see that Xtract Resources shareholders have received a total shareholder return of 12% over the last year. Notably the five-year annualised TSR loss of 51% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Xtract Resources may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.