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Some Fireweed Zinc (CVE:FWZ) Shareholders Have Copped A Big 68% Share Price Drop

Simply Wall St

Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Fireweed Zinc Ltd. (CVE:FWZ) have suffered share price declines over the last year. The share price is down a hefty 68% in that time. Fireweed Zinc hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 25% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

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See our latest analysis for Fireweed Zinc

Fireweed Zinc hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that Fireweed Zinc finds some valuable resources, before it runs out of money.

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. Fireweed Zinc has already given some investors a taste of the bitter losses that high risk investing can cause.

Fireweed Zinc had net cash of just CA$537k when it last reported (December 2018). 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 68% in the last year. The image below shows how Fireweed Zinc's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

TSXV:FWZ Historical Debt, May 20th 2019

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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.

A Different Perspective

Given that the market gained 1.7% in the last year, Fireweed Zinc shareholders might be miffed that they lost 68%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 25% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Fireweed Zinc is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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 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.