Yahoo Finance Imagine Owning Syrah Resources (ASX:SYR) And Trying To Stomach The 90% Share Price Drop
We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Anyone who held Syrah Resources Limited (ASX:SYR) for five years would be nursing their metaphorical wounds since the share price dropped 90% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 74% over the last twelve months. The falls have accelerated recently, with the share price down 54% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Check out our latest analysis for Syrah Resources
Because Syrah Resources is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, Syrah Resources saw its revenue increase by 72% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price has averaged a fall of 36% each year, in the same time period. You'd have to assume the market is worried that profits won't come soon enough. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Syrah Resources will earn in the future (free profit forecasts).
A Different Perspective
Investors in Syrah Resources had a tough year, with a total loss of 74%, against a market gain of about 22%. 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 35% per year over five years. 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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.
