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Deep-South Resources Inc. (CVE:DSM) shareholders will doubtless be very grateful to see the share price up 67% in the last month. But in truth the last year hasn't been good for the share price. After all, the share price is down 44% in the last year, significantly under-performing the market.

View our latest analysis for Deep-South Resources

Deep-South Resources didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). 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. For example, investors may be hoping that Deep-South Resources finds some valuable resources, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty 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.

Deep-South Resources had liabilities exceeding cash by CA$1,053,606 when it last reported in February 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 44% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Deep-South Resources's cash levels have changed over time. The image below shows how Deep-South Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

Given that the market gained 1.2% in the last year, Deep-South Resources shareholders might be miffed that they lost 44%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. Putting aside the last twelve months, it's good to see the share price has rebounded by 5.3%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). You could get a better understanding of Deep-South Resources's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.