Yahoo Finance Such Is Life: How Decade Resources (CVE:DEC) Shareholders Saw Their Shares Drop 63%
Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example the Decade Resources Ltd. (CVE:DEC) share price dropped 63% over five years. That's an unpleasant experience for long term holders. And it's not just long term holders hurting, because the stock is down 57% in the last year.
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See our latest analysis for Decade Resources
Decade Resources 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 shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Decade Resources finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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). It certainly is a dangerous place to invest, as Decade Resources investors might realise.
Our data indicates that Decade Resources had CA$2,442,711 more in total liabilities than it had cash, when it last reported in January 2019. That puts it in the highest risk category, according to our analysis. But since the share price has dived -18% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Decade Resources's cash levels have changed over time (click to see the values).
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. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market gained around 1.6% in the last year, Decade Resources shareholders lost 57%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 18% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
