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Such Is Life: How Amarc Resources (CVE:AHR) Shareholders Saw Their Shares Drop 55%

The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of Amarc Resources Ltd. (CVE:AHR) have suffered share price declines over the last year. The share price is down a hefty 55% in that time. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 40%) in that time. On top of that, the share price has dropped a further 25% in a month.

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See our latest analysis for Amarc Resources

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With zero revenue generated over twelve months, we don't think that Amarc 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? 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. It seems likely some shareholders believe that Amarc 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 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. It certainly is a dangerous place to invest, as Amarc Resources investors might realise.

Amarc Resources had liabilities exceeding cash by CA$453,318 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. But with the share price diving 55% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Amarc Resources's cash levels have changed over time (click to see the values).

TSXV:AHR Historical Debt, May 24th 2019
TSXV:AHR Historical Debt, May 24th 2019

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Would it bother you if insiders were selling the 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

Investors in Amarc Resources had a tough year, with a total loss of 55%, against a market gain of about 1.0%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5.6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Amarc Resources's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like Amarc Resources 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.

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.