Yahoo Finance Does Desert Mountain Energy's (CVE:DME) Share Price Gain of 50% Match Its Business Performance?
Desert Mountain Energy Corp. (CVE:DME) shareholders might be concerned after seeing the share price drop 18% in the last quarter. But over three years, the returns would have left most investors smiling To wit, the share price did better than an index fund, climbing 50% during that period.
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View our latest analysis for Desert Mountain Energy
Desert Mountain Energy hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that Desert Mountain Energy 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
When it last reported its balance sheet in December 2018, Desert Mountain Energy had cash in excess of all liabilities of CA$1.2m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price up 14% per year, over 3 years, the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how Desert Mountain Energy's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.
A Different Perspective
Over the last year, Desert Mountain Energy shareholders took a loss of 10.0%. In contrast the market gained about 1.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 14% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Before spending more time on Desert Mountain Energy it might be wise to click here to see if insiders have been buying or selling shares.
But note: Desert Mountain Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
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.
