If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Matachewan Consolidated Mines, Limited (CVE:MCM.A) have had an unfortunate run in the last three years. Sadly for them, the share price is down 66% in that time. And more recent buyers are having a tough time too, with a drop of 40% in the last year. The falls have accelerated recently, with the share price down 33% in the last three months.
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Matachewan Consolidated Mines hasn't yet reported any revenue yet, 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 Matachewan Consolidated Mines will discover or develop fossil fuel 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). Some Matachewan Consolidated Mines 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 December 2018, Matachewan Consolidated Mines could boast a strong position, with cash in excess of all liabilities of CA$1.9m. That allows management to focus on growing the business, and not worry too much about raising capital. But since the share price has dropped 30% per year, over 3 years, it seems like the market might have been over-excited previously. The image below shows how Matachewan Consolidated Mines'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. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Dividend Lost
The share price return figures discussed above don't include the value of dividends paid previously, but the total shareholder return (TSR) does. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. Over the last 3 years, Matachewan Consolidated Mines generated a TSR of -63%, which is, of course, better than the share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.
A Different Perspective
While the broader market gained around 1.7% in the last year, Matachewan Consolidated Mines shareholders lost 40%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: Matachewan Consolidated Mines 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 CA exchanges.
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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.