If You Had Bought Boreal Metals (CVE:BMX) Stock A Year Ago, You'd Be Sitting On A 66% Loss, Today
Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of Boreal Metals Corp. (CVE:BMX) have suffered share price declines over the last year. The share price is down a hefty 66% in that time. We wouldn't rush to judgement on Boreal Metals because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 38% in the last three months.
See our latest analysis for Boreal Metals
Boreal Metals hasn't yet reported any revenue, so it's as much a business idea as an actual business. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Boreal Metals will find or develop a valuable new mine before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Boreal Metals has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in March 2019 Boreal Metals had minimal cash in excess of all liabilities consider its expenditure: just CA$551k to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 66% in the last year. You can see in the image below, how Boreal Metals's cash levels have changed over time (click to see the values).
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. Would it bother you if insiders were selling the 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
While Boreal Metals shareholders are down 66% for the year, the market itself is up 1.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 38% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Boreal Metals it might be wise to click here to see if insiders have been buying or selling shares.
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.
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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. Thank you for reading.