Oakdale Resources Limited (ASX:OAR) shareholders will doubtless be very grateful to see the share price up 50% in the last week. But that is meagre solace when you consider how the price has plummeted over the last year. To wit, the stock has dropped 82% over the last year. So the rise may not be much consolation. The bigger issue is whether the company can sustain the momentum in the long term.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
We don't think Oakdale Resources's revenue of AU$3,867 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Oakdale Resources will find or develop a valuable new mine before too long.
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). Oakdale Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Oakdale Resources had AU$785k more in total liabilities than it had cash, when it last reported in December 2019. That puts it in the highest risk category, according to our analysis. But since the share price has dived -82% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Oakdale Resources'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. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Oakdale Resources shareholders are down 82% for the year, even worse than the market loss of 17%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 50%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Oakdale Resources has 8 warning signs (and 5 which are concerning) we think you should know about.
We will like Oakdale Resources better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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