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Clarmin Explorations Inc. (CVE:CX) shareholders should be happy to see the share price up 20% in the last quarter. But that is minimal compensation for the share price under-performance over the last year. After all, the share price is down 40% in the last year, significantly under-performing the market.
Clarmin Explorations didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Clarmin Explorations finds some valuable resources, before it runs out of money.
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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing.
When it last reported its balance sheet in January 2019, Clarmin Explorations could boast a strong position, with cash in excess of all liabilities of CA$382k. That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 40% in the last year, it could be that the price was previously too hyped up. You can click on the image below to see (in greater detail) how Clarmin Explorations's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling 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
Given that the market gained 1.4% in the last year, Clarmin Explorations shareholders might be miffed that they lost 40%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 20% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). You could get a better understanding of Clarmin Explorations's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like Clarmin Explorations better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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