The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Laramide Resources Ltd. (TSE:LAM), since the last five years saw the share price fall 28%. The last week also saw the share price slip down another 7.3%.
Laramide Resources didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). 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. For example, they may be hoping that Laramide Resources finds fossil fuels with an exploration program, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. 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 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).
Our data indicates that Laramide Resources had net debt of CA$18,137,004 when it last reported in December 2018. That makes it extremely high risk, in our view. But with the share price diving 6.4% per year, over 5 years, it’s probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Laramide Resources’s cash and debt levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that’s for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
It’s good to see that Laramide Resources has rewarded shareholders with a total shareholder return of 13% in the last twelve months. Notably the five-year annualised TSR loss of 6.4% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.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 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. Thank you for reading.