Yahoo Finance Those Who Purchased Element (OB:ELE) Shares Five Years Ago Have A 97% Loss To Show For It
Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held Element ASA (OB:ELE) for five whole years - as the share price tanked 97%. Shareholders have had an even rougher run lately, with the share price down 23% in the last 90 days. Of course, this share price action may well have been influenced by the 18% decline in the broader market, throughout the period.
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 Element
With just US$156,000 worth of revenue in twelve months, we don't think the market considers Element to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Element will find or develop a valuable new mine before too long.
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 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 Element investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it reported in December 2019 Element had minimal cash in excess of all liabilities consider its expenditure: just US$2.2m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 52% per year, over 5 years. You can see in the image below, how Element's cash levels have changed over time (click to see the values).
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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
We're pleased to report that Element shareholders have received a total shareholder return of 1.3% over one year. Notably the five-year annualised TSR loss of 52% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 7 warning signs for Element (5 don't sit too well with us) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.
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.
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. Thank you for reading.
