Yahoo Finance If You Had Bought Pershimex Resources (CVE:PRO) Stock Three Years Ago, You'd Be Sitting On A 62% Loss, Today
It is doubtless a positive to see that the Pershimex Resources Corporation (CVE:PRO) share price has gained some 67% in the last three months. But that doesn't change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 62%. So it is really good to see an improvement. The rise has some hopeful, but turnarounds are often precarious.
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View our latest analysis for Pershimex Resources
With zero revenue generated over twelve months, we don't think that Pershimex 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? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Pershimex Resources will find or develop a valuable new mine before too long.
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 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 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). Pershimex Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Pershimex Resources had CA$13,913 more in total liabilities than it had cash, when it last reported in November 2018. That puts it in the highest risk category, according to our analysis. But since the share price has dived -27% per year, over 3 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Pershimex Resources's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Investors in Pershimex Resources had a tough year, with a total loss of 29%, against a market gain of about 1.6%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5.1% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
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.
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.
