The truth is that if you invest for long enough, you’re going to end up with some losing stocks. But the last three years have been particularly tough on longer term Coppermoly Limited (ASX:COY) shareholders. Regrettably, they have had to cope with a 73% drop in the share price over that period. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
With just AU$32,057 worth of revenue in twelve months, we don’t think the market considers Coppermoly to have proven its business plan. 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 Coppermoly 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. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Coppermoly investors might realise.
Coppermoly had liabilities exceeding cash by AU$514k when it last reported in June 2019, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -35% 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 Coppermoly’s cash levels have changed over time. You can see in the image below, how Coppermoly’s cash levels have changed over time (click to see the values).
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Coppermoly’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Coppermoly’s TSR, at -69% is higher than its share price return of -73%. When you consider it hasn’t been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Coppermoly shareholders are down 14% for the year, but the market itself is up 7.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we’ve identified 6 warning signs for Coppermoly (3 are significant) that you should be aware of.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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 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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