Riverstone Share Price Is Down By 25% In The Last 12 Months. Here’s Why.

Riverstone Holdings Limited (SGX: AP4)  is a company operating in two key areas of the rubber gloves industry, namely, Cleanroom Gloves and Medical Gloves.

It’s also one of the best performing companies in the last 5 years, having gained 370% during that period.

Nevertheless, the company stock price has been lagging in the last 12 months, down by around 25%.

There are many reasons why a company’s share price may go down. It could be driven by business performance or by investor sentiment.

The former is related to how a business performs in a given period by looking at metrics such as growth, margins, production and others. Here, the ultimate driver is profit.

The latter is driven more by investors’ overall mood, which is described by emotions such as greed and fear, optimism and pessimism etc…

So which could the main culprits?


Riverstone third-quarter 2016 announcement

Here, we see that net profit for the third quarter was down by 15.6% year-on-year. Clearly, that’s a negative.

But, sharp-eyed investors will realise that year-to-date net profit is down by “only” 5.6%. Moreover, revenue has actually gone up during the period.

So clearly, the former must have impacted the share price. But to the extent of 25%?

So by default, we might attribute the additional 20% decline to weak investor sentiment.

Clearly, both the weaker business performance and weak investor sentiment might explain the decline in the share price.

But, there might be another reason that could explain the decline in share price.

The above results are in denominated Malaysian ringgit. In the past 12 months, the Singapore dollar has appreciated by about 7% to 9%, on average, against the Malaysian currency.

In other words, all the assets and earnings of Riverstone are worth less in 2016 than they did in 2015 by about 7-9%.

Putting all the 3 factors together could provide us with a reasonable explanation for the decline in Riverstone’s share price.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Riverstone Holdings. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.