Teras Resources Inc. (CVE:TRA) shareholders should be happy to see the share price up 11% in the last month. But only the myopic could ignore the astounding decline over three years. To wit, the share price sky-dived 71% in that time. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround.
Teras Resources hasn’t yet reported any revenue, so it’s as much a business idea as an actual business. You have to wonder why venture capitalists aren’t funding it. 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 Teras Resources finds some valuable resources, before it runs out of money.
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 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). Teras Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Teras Resources had liabilities exceeding cash by CA$154,809 when it last reported in February 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -33% per year, over 3 years, it looks like some investors think it’s time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Teras Resources’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’d like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Different Perspective
Teras Resources shareholders are down 17% for the year, but the market itself is up 2.2%. 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 19% 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. You could get a better understanding of Teras Resources’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: Teras 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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