If You Had Bought Mayur Resources (ASX:MRL) Stock A Year Ago, You'd Be Sitting On A 23% Loss, Today
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Mayur Resources Ltd (ASX:MRL) share price is down 23% in the last year. That's well bellow the market return of 12%. Mayur Resources hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time.
Check out our latest analysis for Mayur Resources
With just AU$125,813 worth of revenue in twelve months, we don't think the market considers Mayur Resources to have proven its business plan. 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 Mayur Resources finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
Mayur Resources had cash in excess of all liabilities of just AU$600k when it last reported (June 2019). 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 23% in the last year . You can click on the image below to see (in greater detail) how Mayur Resources's cash levels have changed over time. You can click on the image below to see (in greater detail) how Mayur Resources's cash levels have changed over time.
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 would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Given that the market gained 12% in the last year, Mayur Resources shareholders might be miffed that they lost 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 1.8%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. You could get a better understanding of Mayur Resources's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
