Imagine Owning BCI Minerals (ASX:BCI) And Trying To Stomach The 94% Share Price Drop
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While it may not be enough for some shareholders, we think it is good to see the BCI Minerals Limited (ASX:BCI) share price up 22% in a single quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 94% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
See our latest analysis for BCI Minerals
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
BCI Minerals became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
Arguably, the revenue drop of 52% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that BCI Minerals has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between BCI Minerals's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that BCI Minerals's TSR, which was a 93% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
It's good to see that BCI Minerals has rewarded shareholders with a total shareholder return of 34% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 41% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. Is BCI Minerals cheap compared to other companies? These 3 valuation measures might help you decide.
We will like BCI Minerals better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.
