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Did You Manage To Avoid New Nadina Explorations's (CVE:NNA) Painful 57% Share Price Drop?

We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the New Nadina Explorations Limited (CVE:NNA) share price managed to fall 57% over five long years. That is extremely sub-optimal, to say the least. And it's not just long term holders hurting, because the stock is down 51% in the last year. There was little comfort for shareholders in the last week as the price declined a further 5.6%.

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View our latest analysis for New Nadina Explorations

With zero revenue generated over twelve months, we don't think that New Nadina Explorations has proved its business plan yet. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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. It seems likely some shareholders believe that New Nadina Explorations 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. 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 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 New Nadina Explorations investors have already had a taste of the bitterness stocks like this can leave in the mouth.

When it reported in February 2019 New Nadina Explorations had minimal cash in excess of all liabilities consider its expenditure: just CA$240k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 16% per year, over 5 years. You can click on the image below to see (in greater detail) how New Nadina Explorations's cash levels have changed over time.

TSXV:NNA Historical Debt, May 27th 2019
TSXV:NNA Historical Debt, May 27th 2019

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? 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 Different Perspective

Investors in New Nadina Explorations had a tough year, with a total loss of 51%, against a market gain of about 1.6%. 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 16% over the last half decade. 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 New Nadina Explorations's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

But note: New Nadina Explorations 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.

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.