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It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the AbraPlata Resource Corp. (CVE:ABRA) share price is down 32% in the last year. That's disappointing when you consider the market returned 0.6%. Because AbraPlata Resource hasn't been listed for many years, the market is still learning about how the business performs. The silver lining is that the stock is up 63% in about a week.
AbraPlata Resource 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. 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 AbraPlata Resource 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.
AbraPlata Resource had liabilities exceeding cash by CA$881,621 when it last reported in March 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 32% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how AbraPlata Resource's cash levels have changed over time. You can see in the image below, how AbraPlata Resource's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling 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 AbraPlata Resource shareholders are down 32% for the year, the market itself is up 0.6%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's great to see a nice little 8.3% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. If you would like to research AbraPlata Resource 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 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 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.