Yahoo Finance Did Changing Sentiment Drive Helix Resources's (ASX:HLX) Share Price Down A Painful 78%?
It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Helix Resources Limited (ASX:HLX) investors who have held the stock for three years as it declined a whopping 78%. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 45% in a year. The falls have accelerated recently, with the share price down 22% in the last three months.
See our latest analysis for Helix Resources
With just AU$38,478 worth of revenue in twelve months, we don't think the market considers Helix Resources to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Helix Resources finds some valuable resources, 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. 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). Helix Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in December 2018 Helix Resources had minimal cash in excess of all liabilities consider its expenditure: just AU$802k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 39% per year, over 3 years. You can see in the image below, how Helix Resources's cash levels have changed over time (click to see the values). You can see in the image below, how Helix Resources's 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? 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
Helix Resources shareholders are down 45% for the year, but the market itself is up 7.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before spending more time on Helix Resources it might be wise to click here to see if insiders have been buying or selling shares.
We will like Helix Resources 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.
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.
