The nature of investing is that you win some, and you lose some. And there’s no doubt that Falco Resources Ltd. (CVE:FPC) stock has had a really bad year. The share price is down a hefty 64% in that time. Notably, shareholders had a tough run over the longer term, too, with a drop of 53% in the last three years. Furthermore, it’s down 27% in about a quarter. That’s not much fun for holders.
With zero revenue generated over twelve months, we don’t think that Falco Resources has proved its business plan yet. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? 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. For example, investors may be hoping that Falco Resources finds some valuable resources, before it runs out of money.
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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Falco Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Falco Resources had net debt of CA$45,964,001 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -64% in the last year, it looks like some investors think it’s time to abandon ship, so to speak. The image below shows how Falco Resources’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Investors in Falco Resources had a tough year, with a total loss of 64%, against a market gain of about 7.2%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Falco Resources by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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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.