Those Who Purchased ZincX Resources (CVE:ZNX) Shares Five Years Ago Have A 57% Loss To Show For It
Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example, after five long years the ZincX Resources Corp. (CVE:ZNX) share price is a whole 57% lower. That is extremely sub-optimal, to say the least. And we doubt long term believers are the only worried holders, since the stock price has declined 34% over the last twelve months. On top of that, the share price has dropped a further 9.3% in a month.
See our latest analysis for ZincX Resources
ZincX Resources hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that ZincX Resources finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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 ZincX Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
ZincX Resources had net cash of just CA$2.0m when it last reported (December 2018). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 15% per year, over 5 years. You can see in the image below, how ZincX Resources's cash and debt 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. What if insiders are ditching the stock hand over fist? 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
While the broader market gained around 7.8% in the last year, ZincX Resources shareholders lost 34%. 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 15% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. If you would like to research ZincX Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: ZincX Resources 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.
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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.
