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We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held Transatlantic Mining Corp. (CVE:TCO) for five whole years - as the share price tanked 98%. We also note that the stock has performed poorly over the last year, with the share price down 50%. Furthermore, it's down 60% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Transatlantic Mining didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). 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 Transatlantic Mining finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Transatlantic Mining investors might realise.
Transatlantic Mining had net debt of CA$8,984,695 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. But with the share price diving 56% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Transatlantic Mining's cash levels have changed over time (click to see the values).
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? 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 Transatlantic Mining had a tough year, with a total loss of 50%, against a market gain of about 4.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 56% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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 firstname.lastname@example.org. 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.