Yahoo Finance Volatility 101: Should Union Jack Oil (LON:UJO) Shares Have Dropped 47%?
Union Jack Oil plc (LON:UJO) shareholders should be happy to see the share price up 14% in the last month. But over the last half decade, the stock has not performed well. After all, the share price is down 47% in that time, significantly under-performing the market.
Check out our latest analysis for Union Jack Oil
With just UK£101,916 worth of revenue in twelve months, we don't think the market considers Union Jack Oil to have proven its business plan. You have to wonder why venture capitalists aren't funding it. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Union Jack Oil will discover or develop fossil fuel before too long.
Companies that lack both meaningful revenue and profits are usually considered 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, Union Jack Oil had net cash of UK£1.4m. 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. We'd venture that shareholders are concerned about the need for more capital, because the share price has dropped 12% per year, over 5 years. The image below shows how Union Jack Oil'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. Would it bother you if insiders were selling the stock? 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.
A Different Perspective
It's good to see that Union Jack Oil has rewarded shareholders with a total shareholder return of 18% in the last twelve months. That certainly beats the loss of about 12% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. You could get a better understanding of Union Jack Oil's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: Union Jack Oil 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 GB 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.
