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The nature of investing is that you win some, and you lose some. And there's no doubt that Altai Resources Inc. (CVE:ATI) stock has had a really bad year. In that relatively short period, the share price has plunged 69%. On the other hand, the stock is actually up 20% over three years.
Check out our latest analysis for Altai Resources
With just CA$246,835 worth of revenue in twelve months, we don't think the market considers Altai Resources to have proven its business plan. 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. It seems likely some shareholders believe that Altai Resources will discover or develop fossil fuel before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Altai Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Altai Resources has plenty of cash in the bank, with net cash sitting at CA$3.3m, when it last reported (December 2018). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But with the share price diving 69% in the last year, it could be that the price was previously too hyped up. You can click on the image below to see (in greater detail) how Altai Resources's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Altai Resources's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Altai Resources's TSR, at -69% is higher than its share price return of -69%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.