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It's not a secret that every investor will make bad investments, from time to time. But it should be a priority to avoid stomach churning catastrophes, wherever possible. We wouldn't blame Aethon Minerals Corp. (CVE:AET) shareholders if they were still in shock after the stock dropped like a lead balloon, down 79% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Notably, shareholders had a tough run over the longer term, too, with a drop of 76% in the last three years. The falls have accelerated recently, with the share price down 19% in the last three months.

Check out our latest analysis for Aethon Minerals

With zero revenue generated over twelve months, we don't think that Aethon Minerals has proved its business plan yet. 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. For example, investors may be hoping that Aethon Minerals finds some valuable resources, before it runs out of money.

Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Aethon Minerals has already given some investors a taste of the bitter losses that high risk investing can cause.

Aethon Minerals had cash in excess of all liabilities of CA$3.8m when it last reported (December 2018). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price down 79% in the last year, it seems likely that the need for cash is weighing on investors' minds. The image below shows how Aethon Minerals'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. What if insiders are ditching the stock hand over fist? 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

Aethon Minerals shareholders are down 79% for the year, but the market itself is up 2.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.4% over the last half decade. 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Aethon Minerals 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 CA 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.