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The Avrupa Minerals (CVE:AVU) Share Price Is Down 93% So Some Shareholders Are Rather Upset

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Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Avrupa Minerals Ltd. (CVE:AVU) during the five years that saw its share price drop a whopping 93%. We also note that the stock has performed poorly over the last year, with the share price down 78%. The falls have accelerated recently, with the share price down 33% in the last three months.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

See our latest analysis for Avrupa Minerals

Avrupa Minerals hasn't yet reported any revenue, so it's as much a business idea as an actual business. 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 Avrupa Minerals finds some valuable resources, before it runs out of money.

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 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). Some Avrupa Minerals investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Avrupa Minerals had liabilities exceeding cash by CA$1,065,949 when it last reported in March 2019, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -42% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Avrupa Minerals's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how Avrupa Minerals's cash levels have changed over time.

TSXV:AVU Historical Debt, July 31st 2019
TSXV:AVU Historical Debt, July 31st 2019

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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

Investors in Avrupa Minerals had a tough year, with a total loss of 78%, against a market gain of about 0.7%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 42% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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 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.