As every investor would know, you don't hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. It must have been painful to be a Aus Tin Mining Limited (ASX:ANW) shareholder over the last year, since the stock price plummeted 83% in that time. That'd be a striking reminder about the importance of diversification. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 73%) in that time. The falls have accelerated recently, with the share price down 61% in the last three months.
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.
Aus Tin 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). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Aus Tin Mining 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 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 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). It certainly is a dangerous place to invest, as Aus Tin Mining investors might realise.
Our data indicates that Aus Tin Mining had AU$4.6m more in total liabilities than it had cash, when it last reported in December 2018. That makes it extremely high risk, in our view. But with the share price diving 83% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Aus Tin Mining's cash levels have changed over time. You can see in the image below, how Aus Tin Mining's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? 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
Investors in Aus Tin Mining had a tough year, with a total loss of 83%, against a market gain of about 13%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6.7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Aus Tin Mining's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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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.