Yahoo Finance Such Is Life: How Azarga Metals (CVE:AZR) Shareholders Saw Their Shares Drop 69%
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Azarga Metals Corp. (CVE:AZR) shareholders should be happy to see the share price up 29% in the last month. But that doesn't change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 69% in the period. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a turnaround.
Check out our latest analysis for Azarga Metals
With zero revenue generated over twelve months, we don't think that Azarga Metals has proved its business plan yet. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Azarga Metals 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Azarga Metals has already given some investors a taste of the bitter losses that high risk investing can cause.
Azarga Metals had liabilities exceeding cash by CA$2,240,046 when it last reported in March 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 21% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Azarga Metals's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Different Perspective
While the broader market gained around 1.4% in the last year, Azarga Metals shareholders lost 19%. 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. However, the loss over the last year isn't as bad as the 21% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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.
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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.
