IronRidge Resources Limited (LON:IRR) shareholders should be happy to see the share price up 18% in the last month. But that doesn't change the fact that the returns over the last year have been less than pleasing. In fact the stock is down 38% in the last year, well below the market return.
View our latest analysis for IronRidge Resources
IronRidge Resources recorded just AU$21,072 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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. For example, investors may be hoping that IronRidge Resources finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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).
When it reported in June 2019 IronRidge Resources had minimal cash in excess of all liabilities consider its expenditure: just AU$5.3m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 38% in the last year . You can see in the image below, how IronRidge Resources's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how IronRidge Resources's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit, making the share price more sensitive to other factors. For example, we've discovered 7 warning signs for IronRidge Resources (of which 3 are major) which any shareholder or potential investor should be aware of.
A Different Perspective
The last twelve months weren't great for IronRidge Resources shares, which cost holders 38%, while the market was up about 18%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 13% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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 GB 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.
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