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Such Is Life: How Almaden Minerals (TSE:AMM) Shareholders Saw Their Shares Drop 58%

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Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Almaden Minerals Ltd. (TSE:AMM) share price is a whole 58% lower. We certainly feel for shareholders who bought near the top. We also note that the stock has performed poorly over the last year, with the share price down 38%. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Check out our latest analysis for Almaden Minerals

Almaden Minerals 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? 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. It seems likely some shareholders believe that Almaden Minerals will find or develop a valuable new mine before too long.

Companies that lack both meaningful revenue and profits are usually considered 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 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). Almaden Minerals has already given some investors a taste of the bitter losses that high risk investing can cause.

Almaden Minerals had cash in excess of all liabilities of just CA$888k when it last reported (March 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 16% per year, over 5 years. You can click on the image below to see (in greater detail) how Almaden Minerals's cash levels have changed over time.

TSX:AMM Historical Debt, May 28th 2019
TSX:AMM Historical Debt, May 28th 2019

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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

While the broader market gained around 2.5% in the last year, Almaden Minerals shareholders lost 38%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 16% over the last half decade. 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. Before spending more time on Almaden Minerals it might be wise to click here to see if insiders have been buying or selling shares.

But note: Almaden Minerals 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 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.

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