Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Corporación Empresarial de Materiales de Construcción, S.A. (BME:CMC), who have seen the share price tank a massive 82% over a three year period. That would be a disturbing experience.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
We don’t think Corporación Empresarial de Materiales de Construcción’s revenue of €5,000 is enough to establish significant demand. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? 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 Corporación Empresarial de Materiales de Construcción will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Corporación Empresarial de Materiales de Construcción investors might realise.
Corporación Empresarial de Materiales de Construcción had liabilities exceeding cash by €48m when it last reported in June 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -44% 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 Corporación Empresarial de Materiales de Construcción’s cash levels have changed over time (click to see the values). Look at the image below to see how Corporación Empresarial de Materiales de Construcción’s cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? 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
Corporación Empresarial de Materiales de Construcción shareholders are down 14% for the year, but the market itself is up 7.6%. 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. However, the loss over the last year isn’t as bad as the 22% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Before spending more time on Corporación Empresarial de Materiales de Construcción it might be wise to click here to see if insiders have been buying or selling shares.
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 ES exchanges.
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.
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