Investors Who Bought MacDonald Mines Exploration (CVE:BMK) Shares Three Years Ago Are Now Down 57%

By
Simply Wall St
Published
April 29, 2020
TSXV:BMK

Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term MacDonald Mines Exploration Ltd. (CVE:BMK) shareholders. Sadly for them, the share price is down 57% in that time.

See our latest analysis for MacDonald Mines Exploration

With just CA$74,000 worth of revenue in twelve months, we don't think the market considers MacDonald Mines Exploration to have proven its business plan. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 MacDonald Mines Exploration will find or develop a valuable new mine before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. There was already a significant chance that they would need more money for business development, and indeed they recently put themselves at the mercy of capital markets and raised equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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). Some MacDonald Mines Exploration investors have already had a taste of the bitterness stocks like this can leave in the mouth.

MacDonald Mines Exploration had liabilities exceeding cash when it last reported, according to our data. That made it extremely high risk, in our view. But with the share price diving 25% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed or they are worried about dilution with the recent cash injection. The image below shows how MacDonald Mines Exploration's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

TSXV:BMK Historical Debt April 29th 2020
TSXV:BMK Historical Debt April 29th 2020

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 only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

It's good to see that MacDonald Mines Exploration has rewarded shareholders with a total shareholder return of 50% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 5.6% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand MacDonald Mines Exploration better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for MacDonald Mines Exploration (of which 4 shouldn't be ignored!) you should know about.

MacDonald Mines Exploration is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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