Did You Miss Atlantic Sapphire's (OB:ASA) Impressive 281% Share Price Gain?

By
Simply Wall St
Published
November 22, 2020
OB:ASA
Source: Shutterstock

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Atlantic Sapphire ASA (OB:ASA) share price has flown 281% in the last three years. How nice for those who held the stock! We note the stock price is up 1.2% in the last seven days.

Check out our latest analysis for Atlantic Sapphire

With just US$6,021,000 worth of revenue in twelve months, we don't think the market considers Atlantic Sapphire to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Atlantic Sapphire can make progress and gain better traction for the business, before it runs low on cash.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as Atlantic Sapphire investors might know.

Atlantic Sapphire had liabilities exceeding cash when it last reported, according to our data. That made it extremely high risk, in our view. So the fact that the stock is up 61% per year, over 3 years shows that the cash injection was a welcome one. It's clear more than a few people believe in the potential. The image below shows how Atlantic Sapphire's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

debt-equity-history-analysis
OB:ASA Debt to Equity History November 23rd 2020

Of course, the truth is that it is hard to value companies without much revenue or profit. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

The last twelve months weren't great for Atlantic Sapphire shares, which performed worse than the market, costing holders 14%. Meanwhile, the broader market slid about 1.3%, likely weighing on the stock. Investors are up over three years, booking 56% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. It's always interesting to track share price performance over the longer term. But to understand Atlantic Sapphire better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Atlantic Sapphire .

Atlantic Sapphire is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.

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