The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of Hi Ho Silver Resources Inc. (CNSX:HHS) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 56%. We wouldn't rush to judgement on Hi Ho Silver Resources because we don't have a long term history to look at. It's up 33% in the last seven days.
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Hi Ho Silver Resources 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). This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Hi Ho Silver Resources finds some valuable resources, before it runs out of money.
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). Some Hi Ho Silver Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Hi Ho Silver Resources had liabilities exceeding cash by CA$811,528 when it last reported in January 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -56% 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 Hi Ho Silver 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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? 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
Given that the market gained 1.5% in the last year, Hi Ho Silver Resources shareholders might be miffed that they lost 56%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 14% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like Hi Ho Silver 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 CA 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.