MacDonald Mines Exploration Ltd. (CVE:BMK) shareholders might understandably be very concerned that the share price has dropped 48% in the last quarter. But that doesn’t detract from the splendid returns of the last year. Indeed, the share price is up an impressive 150% in that time. So it is important to view the recent reduction in price through that lense. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.
See our latest analysis for MacDonald Mines Exploration
We don’t think MacDonald Mines Exploration’s revenue of CA$74,000 is enough to establish significant demand. 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 MacDonald Mines Exploration 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). MacDonald Mines Exploration has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Our data indicates that MacDonald Mines Exploration had CA$1.0m more in total liabilities than it had cash, when it last reported in September 2019. That makes it extremely high risk, in our view. So we’re surprised to see the stock up 84% in the last year , but we’re happy for holders. Investors must really like its potential. You can see in the image below, how MacDonald Mines Exploration’s cash levels have changed over time (click to see the values). You can see in the image below, how MacDonald Mines Exploration’s cash levels have changed over time (click to see the values).
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. However you can take a look at whether insiders have been buying up shares. It’s often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
It’s nice to see that MacDonald Mines Exploration shareholders have received a total shareholder return of 150% over the last year. That certainly beats the loss of about 13% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example – MacDonald Mines Exploration has 7 warning signs (and 5 which are concerning) we think you should know about.
MacDonald Mines Exploration is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.