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The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held Artemis Resources Limited (ASX:ARV) during the last year don't lose the lesson, in addition to the 83% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. On the bright side, the stock is actually up 55% in the last three years. The falls have accelerated recently, with the share price down 47% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With just AU$3,787,166 worth of revenue in twelve months, we don't think the market considers Artemis Resources to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Artemis Resources will find or develop a valuable new mine before too long.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Artemis Resources investors might realise.
Our data indicates that Artemis Resources had AU$3,081,532 more in total liabilities than it had cash, when it last reported in December 2018. That puts it in the highest risk category, according to our analysis. But since the share price has dived -83% in the last year, it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Artemis Resources'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. 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.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Artemis Resources's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Artemis Resources hasn't been paying dividends, but its TSR of -83% exceeds its share price return of -83%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Artemis Resources shareholders are down 83% for the year, but the market itself is up 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3.8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Artemis Resources it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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 email@example.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.