Did You Manage To Avoid Artemis Resources's (ASX:ARV) Devastating 77% Share Price Drop?
Artemis Resources Limited (ASX:ARV) shareholders should be happy to see the share price up 17% in the last month. But that is meagre solace when you consider how the price has plummeted over the last year. During that time the share price has plummeted like a stone, down 77%. So the rise may not be much consolation. The bigger issue is whether the company can sustain the momentum in the long term.
View our latest analysis for Artemis Resources
With just AU$12,127 worth of revenue in twelve months, we don't think the market considers Artemis Resources to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that Artemis Resources finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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 Artemis Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that Artemis Resources had AU$7.9m more in total liabilities than it had cash, when it last reported in June 2019. That puts it in the highest risk category, according to our analysis. But since the share price has dived -77% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Artemis Resources's cash levels have changed over time. The image below shows how Artemis Resources'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. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Artemis Resources's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Artemis Resources's TSR, at -77% is higher than its share price return of -77%. 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
Investors in Artemis Resources had a tough year, with a total loss of 77%, against a market gain of about 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6.9% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality business. 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 Artemis Resources (1 doesn't sit too well with us) that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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.