Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So consider, for a moment, the misfortune of New Tech Minerals Corp. (CNSX:NTM) investors who have held the stock for three years as it declined a whopping 85%. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 77%, so we doubt many shareholders are delighted. Furthermore, it's down 50% in about a quarter. That's not much fun for holders.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
New Tech Minerals recorded just CA$2,911 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 New Tech 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. New Tech Minerals has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in January 2019 New Tech Minerals had minimal cash in excess of all liabilities consider its expenditure: just CA$302k to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 47% per year, over 3 years. You can click on the image below to see (in greater detail) how New Tech Minerals's cash levels have changed over time.
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. 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. You can click here to see if there are insiders selling.
A Different Perspective
New Tech Minerals shareholders are down 77% for the year, but the broader market is up 1.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 47% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before spending more time on New Tech Minerals it might be wise to click here to see if insiders have been buying or selling shares.
We will like New Tech Minerals better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 firstname.lastname@example.org. 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.