Tribune Resources Limited’s (ASX:TBR) share price took a rare breather today, gaining 0.24% on the day and finally settling on $4.18. For technical analysis aficionados, TBR is right at the level of resistance set during a previous run up that ended in December 2022. Beyond potentially turning $4.20 into support, the path appears clear towards the $4.60 level which has acted as both support and resistance in previous cycles.
Moving back to fundamentals, Tribune Resources are engaged in gold exploration, development, and production activities. Shareholders be riding a wave of optimism as the company’s stock price has surged by a very impressive 41.69% year to date. However, this significant uptick in market sentiment stands in stark contrast to some of the company’s underlying financials, which appear to tell a different story.
A closer examination of Tribune Resources’ financial performance reveals a Return on Equity (ROE) of a mere 3.8%. ROE is a measure of financial performance calculated by dividing net income by shareholders’ equity, essentially reflecting the profitability relative to stockholders’ investments. In the case of Tribune Resources, an ROE of 3.8% signifies weak profitability, which typically does not bode well for attracting long-term investment, given that investors look for returns that at least outpace the cost of capital.
Gold as a commodity has soared in recent times, hitting it’s own all time highs and commanding a very impressive 17% growth over the last year. That is the kind of growth you rarely see in a commodity as large as gold, but this will in part be driving some of the Tribune Resources stock story. Having released half year statements that shone a positive light on revenues and profits has certainly helped accelerate the performance of TBR shares, with almost 28% gains in the last month coming off the back of this announcement.
TBR half revenues rose to $63.4 million against $52.2million, with half year profits (after income tax) up at $14.2million versus $8.1million. Impressive adjustments, but enough to warrant the increase in valuation?
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There is a clear juxtaposition here: on one hand, the market is valuing the stock more highly, but on the other, the company’s financial performance continues to lag. The underwhelming growth, low ROE, and lack of reinvestment in the business do not paint a rosy picture for Tribune Resources’ performance. While current shareholders might be pleased with recent gains, potential investors should be mindful of the underlying financial health of the company.
Anyone getting involved in Tribune Resources may be interested to know that Insiders are the largest shareholder group, with 34% of the shares held by those within the business. This can be seen as a positive in some ways as there is a clear alignment in interests between leadership and shareholders. There is also a healthy 17% of TBR shares held by institutions, again another positive indicator of corporate support. Whilst this implies analysts within these institutions have looked at the stock and like it. they can also be wrong, so you are best to do your own due diligence as always.
Tribune Resources’ share price growth warrants a look, and whilst the stock is still way down from some of the previous highs seen, the strength behind the gold trade and the recent performance of the shares is certainly impressive. Prudent investors should consider whether this momentum can be sustained in the face of the financials. It is not uncommon for the market to eventually realign with the fundamentals, and Tribune Resources may be no exception. Whether this stock can defy the odds and maintain its trajectory in the face of poor financials remains to be seen.
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