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The nature of investing is that you win some, and you lose some. Anyone who held AM Resources Corp. (CVE:AMR) over the last year knows what a loser feels like. In that relatively short period, the share price has plunged 68%. Because AM Resources hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 41% in the last 90 days. 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.
With just CA$1,949,558 worth of revenue in twelve months, we don't think the market considers AM Resources to have proven its business plan. You have to wonder why venture capitalists aren't funding it. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that AM Resources will discover or develop fossil fuel 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 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). AM Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that AM Resources had CA$903,377 more in total liabilities than it had cash, when it last reported in March 2019. That makes it extremely high risk, in our view. But since the share price has dived -68% in the last year, 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 AM Resources's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. What if insiders are ditching the stock hand over fist? 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
While AM Resources shareholders are down 68% for the year, the market itself is up 0.7%. 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. With the stock down 41% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. You could get a better understanding of AM Resources's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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 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. Thank you for reading.