Even the best investor on earth makes unsuccessful investments. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame AM Resources Corp. (CVE:AMR) shareholders if they were still in shock after the stock dropped like a lead balloon, down 75% in just one year. That'd be enough to make even the strongest stomachs churn. AM Resources hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time.
Check out our latest analysis for AM Resources
With just CA$1,503,641 worth of revenue in twelve months, we don't think the market considers AM Resources 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? 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, they may be hoping that AM Resources finds fossil fuels with an exploration program, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some AM Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
AM Resources had liabilities exceeding cash by CA$1.6m when it last reported in September 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -75% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how AM 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 AM 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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
AM Resources shareholders are down 75% for the year, even worse than the market loss of 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 33% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 6 warning signs we've spotted with AM Resources (including 3 which is are potentially serious) .
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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March 02, 2020 at 05:18PM
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Easy Come, Easy Go: How AM Resources (CVE:AMR) Shareholders Got Unlucky And Saw 75% Of Their Cash Evaporate - Yahoo Finance
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