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Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Almadex Minerals Ltd. (CVE:DEX) share price slid 25% over twelve months. That's well bellow the market return of 1.4%. Almadex Minerals hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Even worse, it's down 11% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
Almadex Minerals hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. 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. It seems likely some shareholders believe that Almadex Minerals will find or develop a valuable new mine before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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.
When it last reported its balance sheet in March 2019, Almadex Minerals could boast a strong position, with cash in excess of all liabilities of CA$9.7m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But with the share price diving 25% in the last year, it could be that the price was previously too hyped up. You can see in the image below, how Almadex Minerals's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the 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 1.4% in the last year, Almadex Minerals shareholders might be miffed that they lost 25%. 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. With the stock down 3.5% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. If you would like to research Almadex Minerals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like Almadex 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.