It's not a secret that every investor will make bad investments, from time to time. But it should be a priority to avoid stomach churning catastrophes, wherever possible. We wouldn't blame Kopore Metals Limited (ASX:KMT) shareholders if they were still in shock after the stock dropped like a lead balloon, down 78% in just one year. A loss like this is a stark reminder that portfolio diversification is important. We wouldn't rush to judgement on Kopore Metals because we don't have a long term history to look at. Furthermore, it's down 55% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Check out our latest analysis for Kopore Metals
Kopore Metals recorded just AU$7,546 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Kopore Metals 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. 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. Kopore Metals has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in June 2019 Kopore Metals had minimal cash in excess of all liabilities consider its expenditure: just AU$1.4m 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. With that in mind, you can understand why the share price dropped 78% in the last year . You can see in the image below, how Kopore Metals's cash levels have changed over time (click to see the values). Look at the image below to see how Kopore Metals's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither 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. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Given that the market gained 12% in the last year, Kopore Metals shareholders might be miffed that they lost 78%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 55%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. If you would like to research Kopore Metals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Kopore Metals 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 AU exchanges.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.