Yahoo Finance Did Changing Sentiment Drive Leaf Resources’s Share Price Down A Worrying 52%?
While it may not be enough for some shareholders, we think it is good to see the Leaf Resources Limited (ASX:LER) share price up 16% in a single quarter. But that is small recompense for the exasperating returns over three years. In that time, the share price dropped 52%. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.
View our latest analysis for Leaf Resources
With just AU$1,122,590 worth of revenue in twelve months, we don’t think the market Leaf Resources has proven its business plan. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Leaf Resources will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is almost always a chance they will need to raise more capital, and their progress – and share price – will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Leaf Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Leaf Resources had net debt of AU$615,478 when it last reported in December 2018, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -22% per year, over 3 years, it looks like some investors think it’s time to abandon ship, so to speak. You can see in the image below, how Leaf Resources’s cash and debt 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. Would it bother you if insiders were selling the stock? It would bother me, that’s for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Leaf Resources shareholders are down 33% for the year, but the market itself is up 9.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 6.7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Leaf Resources by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do 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.
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.
