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Did Changing Sentiment Drive Prairie Mining's (ASX:PDZ) Share Price Down A Worrying 51%?

Simply Wall St

Taking the occasional loss comes part and parcel with investing on the stock market. And unfortunately for Prairie Mining Limited (ASX:PDZ) shareholders, the stock is a lot lower today than it was a year ago. The share price has slid 51% in that time. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 17% in three years. It's down 4.0% in the last seven days.

Check out our latest analysis for Prairie Mining

With just AU$557,330 worth of revenue in twelve months, we don't think the market considers Prairie Mining to have proven its business plan. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Prairie Mining will find or develop a valuable new mine before too long.

We think companies that have neither significant revenues nor profits are pretty 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. Some Prairie Mining investors have already had a taste of the bitterness stocks like this can leave in the mouth.

When it last reported its balance sheet in June 2019, Prairie Mining had cash in excess of all liabilities of AU$4.6m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 51% in the last year , it seems likely that the need for cash is weighing on investors' minds. The image below shows how Prairie Mining's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Prairie Mining's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

ASX:PDZ Historical Debt, October 9th 2019

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? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

While the broader market gained around 12% in the last year, Prairie Mining shareholders lost 51%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7.8% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Prairie Mining's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

But note: Prairie Mining may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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 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.