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Karmin Exploration Inc. (CVE:KAR) shareholders might be concerned after seeing the share price drop 13% in the last quarter. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 162% in that time. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.
Karmin Exploration 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). 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 Karmin Exploration 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Karmin Exploration investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
Our data indicates that Karmin Exploration had CA$2,511,142 more in total liabilities than it had cash, when it last reported in January 2019. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 38% per year, over 3 years, but we're happy for holders. It's clear more than a few people believe in the potential. The image below shows how Karmin Exploration's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
It's good to see that Karmin Exploration has rewarded shareholders with a total shareholder return of 23% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 20% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on Karmin Exploration it might be wise to click here to see if insiders have been buying or selling shares.
Of course Karmin Exploration may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.