Easy Come, Easy Go: How Trevali Mining (TSE:TV) Shareholders Got Unlucky And Saw 87% Of Their Cash Evaporate

By
Simply Wall St
Published
February 20, 2020
TSX:TV

Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Trevali Mining Corporation (TSE:TV), who have seen the share price tank a massive 87% over a three year period. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 49%, so we doubt many shareholders are delighted. Even worse, it's down 25% in about a month, which isn't fun at all.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

See our latest analysis for Trevali Mining

Given that Trevali Mining didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Trevali Mining saw its revenue grow by 41% per year, compound. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 50% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

TSX:TV Income Statement, February 20th 2020
TSX:TV Income Statement, February 20th 2020

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Investors in Trevali Mining had a tough year, with a total loss of 49%, against a market gain of about 8.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 31% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Trevali Mining better, we need to consider many other factors. For instance, we've identified 2 warning signs for Trevali Mining that you should be aware of.

Trevali Mining 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.

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.

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. Thank you for reading.

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