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Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Anyone who held Balmoral Resources Ltd (TSE:BAR) for five years would be nursing their metaphorical wounds since the share price dropped 93% in that time. And it's not just long term holders hurting, because the stock is down 39% in the last year. There was little comfort for shareholders in the last week as the price declined a further 8.3%.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Balmoral Resources 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). This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Balmoral Resources 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 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). Balmoral Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Balmoral Resources had liabilities exceeding cash by CA$8,173,777 when it last reported in March 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -42% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Balmoral Resources's cash levels have changed over time. You can see in the image below, how Balmoral Resources's cash levels have changed over time (click to see the values).
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'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Balmoral Resources shareholders are down 39% for the year, but the market itself is up 0.6%. 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 42% 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 would like to research Balmoral Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Balmoral Resources 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 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.