Did Changing Sentiment Drive Tesoro Minerals's (CVE:TES) Share Price Down A Worrying 55%?
Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. Zooming in on an example, the Tesoro Minerals Corp. (CVE:TES) share price dropped 55% in the last half decade. That's an unpleasant experience for long term holders. And it's not just long term holders hurting, because the stock is down 25% in the last year.
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See our latest analysis for Tesoro Minerals
With zero revenue generated over twelve months, we don't think that Tesoro Minerals has proved its business plan yet. 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 Tesoro Minerals finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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. Tesoro Minerals has already given some investors a taste of the bitter losses that high risk investing can cause.
Tesoro Minerals had liabilities exceeding cash by CA$11,941 when it last reported in January 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 15% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Tesoro Minerals's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Investors in Tesoro Minerals had a tough year, with a total loss of 25%, against a market gain of about 1.0%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 15% per year over five years. 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. If you would like to research Tesoro Minerals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
