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It is doubtless a positive to see that the Metalo Manufacturing Inc. (CNSX:MMI) share price has gained some 75% in the last three months. But that doesn’t change the fact that the returns over the last three years have been disappointing. Indeed, the share price is down a tragic 63% in the last three years. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.
Metalo Manufacturing 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 focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Metalo Manufacturing 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. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Metalo Manufacturing has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Metalo Manufacturing had CA$13,877,961 more in total liabilities than it had cash, when it last reported in March 2019. That makes it extremely high risk, in our view. But since the share price has dived -28% per year, over 3 years, it looks like some investors think it’s time to abandon ship, so to speak. You can see in the image below, how Metalo Manufacturing’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. 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 costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
The last twelve months weren’t great for Metalo Manufacturing shares, which cost holders 7.9%, while the market was up about 0.07%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn’t as bad as the 28% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. If you would like to research Metalo Manufacturing in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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 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.