It hasn't been the best quarter for Ausmex Mining Group Limited (ASX:AMG) shareholders, since the share price has fallen 13% in that time. But that doesn't change the fact that the returns over the last year have been very strong. During that period, the share price soared a full 138%. So it may be that the share price is simply cooling off after a strong rise. The real question is whether the business is trending in the right direction.
We don't think Ausmex Mining Group's revenue of AU$2,468,267 is enough to establish significant demand. 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 Ausmex Mining Group 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. 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Ausmex Mining Group has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Our data indicates that Ausmex Mining Group had AU$675k more in total liabilities than it had cash, when it last reported in December 2018. That makes it extremely high risk, in our view. So the fact that the stock is up 87% in the last year shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. You can click on the image below to see (in greater detail) how Ausmex Mining Group's cash levels have changed over time. The image below shows how Ausmex Mining Group'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. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Ausmex Mining Group shareholders should be happy with the total gain of 138% over the last twelve months. Unfortunately the share price is down 13% over the last quarter. Shorter term share price moves often don't signify much about the business itself. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Ausmex Mining Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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 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.