Imagine Owning Tyranna Resources (ASX:TYX) And Trying To Stomach The 94% Share Price Drop
Over the last month the Tyranna Resources Limited (ASX:TYX) has been much stronger than before, rebounding by 50%. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Like a ship taking on water, the share price has sunk 94% in that time. 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.
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See our latest analysis for Tyranna Resources
With just AU$695,182 worth of revenue in twelve months, we don't think the market considers Tyranna 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. For example, investors may be hoping that Tyranna Resources finds some valuable resources, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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. Some Tyranna Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that Tyranna Resources had AU$471,773 more in total liabilities than it had cash, when it last reported in December 2018. That puts it in the highest risk category, according to our analysis. But with the share price diving 43% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Tyranna Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Investors in Tyranna Resources had a tough year, with a total loss of 68%, against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 43% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Tyranna Resources's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like Tyranna Resources 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.
