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Those Who Purchased Ausmex Mining Group (ASX:AMG) Shares A Year Ago Have A 71% Loss To Show For It

It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame Ausmex Mining Group Limited (ASX:AMG) shareholders if they were still in shock after the stock dropped like a lead balloon, down 71% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We wouldn't rush to judgement on Ausmex Mining Group because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 51% in the last 90 days. Of course, this share price action may well have been influenced by the 30% decline in the broader market, throughout the period.

Check out our latest analysis for Ausmex Mining Group

With just AU$1,234,133 worth of revenue in twelve months, we don't think the market considers Ausmex Mining Group to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Ausmex Mining Group 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. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive to current holders. 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 Ausmex Mining Group investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Our data indicates that Ausmex Mining Group had more in total liabilities than it had cash, when it last reported. That made it extremely high risk, in our view. But with the share price diving 71% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed or they are worried about dilution with the recent cash injection. The image below shows how Ausmex Mining Group's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

ASX:AMG Historical Debt March 30th 2020
ASX:AMG Historical Debt March 30th 2020

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? 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

We doubt Ausmex Mining Group shareholders are happy with the loss of 71% over twelve months. That falls short of the market, which lost 19%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 51%, 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. It's always interesting to track share price performance over the longer term. But to understand Ausmex Mining Group better, we need to consider many other factors. To that end, you should learn about the 6 warning signs we've spotted with Ausmex Mining Group (including 2 which is can't be ignored) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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 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.

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. Thank you for reading.

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