Yahoo Finance Some Sabre Resources (ASX:SBR) Shareholders Have Taken A Painful 83% Share Price Drop
This week we saw the Sabre Resources Limited (ASX:SBR) share price climb by 11%. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Indeed, the share price is down a whopping 83% in that time. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The real question is whether the business can leave its past behind and improve itself over the years ahead.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for Sabre Resources
Sabre Resources didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). 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 Sabre Resources finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. The 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Sabre Resources investors might realise.
Sabre Resources had net debt of AU$373,957 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. But with the share price diving 30% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Sabre Resources's cash and debt levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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
Sabre Resources shareholders are down 79% for the year, but the market itself is up 11%. 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 30% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
