Yahoo Finance Sheffield Resources (ASX:SFX) Shareholders Booked A 40% Gain In The Last Three Years
Sheffield Resources Limited (ASX:SFX) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But at least the stock is up over the last three years. However, it’s unlikely many shareholders are elated with the share price gain of 40% over that time, given the rising market.
See our latest analysis for Sheffield Resources
Sheffield 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). 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 Sheffield 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. 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 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).
When it last reported its balance sheet in June 2018, Sheffield Resources had net cash of AU$16m. That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 12% per year, over 3 years, its fair to say investors remain excited about the future, despite the potential need for cash. The image belows shows how Sheffield Resources’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. One thing you can do is check if company insiders are buying shares. It’s usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Sheffield Resources’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. Sheffield Resources hasn’t been paying dividends, but its TSR of 44% exceeds its share price return of 40%, implying it has raised capital at a discount, which is deemed to provide value to shareholders.
A Different Perspective
Sheffield Resources shareholders are down 23% for the year, but the market itself is up 8.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.5% 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. If you would like to research Sheffield Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Sheffield Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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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.
