The nature of investing is that you win some, and you lose some. And there’s no doubt that Moho Resources Limited (ASX:MOH) stock has had a really bad year. In that relatively short period, the share price has plunged 59%. We wouldn’t rush to judgement on Moho Resources because we don’t have a long term history to look at. On top of that, the share price has dropped a further 31% in a month.
Moho Resources recorded just AU$213,432 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Moho Resources finds some valuable resources, before it runs out of money.
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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Moho Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in June 2019 Moho Resources had minimal cash in excess of all liabilities consider its expenditure: just AU$1.2m to be specific. 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 59% in the last year . You can see in the image below, how Moho Resources’s cash levels have changed over time (click to see the values). Look at the image below to see how Moho Resources’s cash levels have changed over time.
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. Would it bother you if insiders were selling the 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
While Moho Resources shareholders are down 59% for the year, the market itself is up 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 28% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. Before spending more time on Moho Resources it might be wise to click here to see if insiders have been buying or selling shares.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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 firstname.lastname@example.org. 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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