Yahoo Finance Did You Manage To Avoid Bounty Oil & Gas's (ASX:BUY) Devastating 75% Share Price Drop?
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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Bounty Oil & Gas NL (ASX:BUY) for five whole years - as the share price tanked 75%. And it's not just long term holders hurting, because the stock is down 50% in the last year. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.
View our latest analysis for Bounty Oil & Gas
Bounty Oil & Gas recorded just AU$2,207,233 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Bounty Oil & Gas will discover or develop fossil fuel before too long.
We think companies that have neither significant revenues nor profits are pretty 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. Bounty Oil & Gas has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Bounty Oil & Gas had AU$2,190,852 more in total liabilities than it had cash, when it last reported in December 2018. That puts it in the highest risk category, according to our analysis. But since the share price has dived -24% 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 Bounty Oil & Gas'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. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Different Perspective
While the broader market gained around 8.7% in the last year, Bounty Oil & Gas shareholders lost 50%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 24% 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 businesses. You could get a better understanding of Bounty Oil & Gas's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
