Imagine Owning Western Investment Company Of Canada (CVE:WI) And Wondering If The 16% Share Price Slide Is Justified

This month, we saw the The Western Investment Company Of Canada Limited (CVE:WI) up an impressive 45%. But that doesn’t change the fact that the returns over the last year have been less than pleasing. The cold reality is that the stock has dropped 16% in one year, under-performing the market.

Check out our latest analysis for Western Investment Company Of Canada

With just CA$200,000 worth of revenue in twelve months, we don’t think the market considers Western Investment Company Of Canada to have proven its business plan. 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 Western Investment Company Of Canada will significantly advance the business plan before too long.

We think companies that have neither significant revenues nor profits are pretty 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.

Western Investment Company Of Canada had net debt of CA$1,685,472 when it last reported in September 2018, according to our data. That makes it extremely high risk, in our view. But with the share price diving 16% in the last year, it’s probably fair to say that some shareholders no longer believe the company will succeed. The image belows shows how Western Investment Company Of Canada’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.

TSXV:WI Historical Debt, March 12th 2019
TSXV:WI Historical Debt, March 12th 2019

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’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 3.4% in the last year, Western Investment Company Of Canada shareholders might be miffed that they lost 16%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. It’s great to see a nice little 4.4% rebound in the last three months. Let’s just hope this isn’t the widely-feared ‘dead cat bounce’ (which would indicate further declines to come). It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Western Investment Company Of Canada is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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.