Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Imagine if you held Regency Mines Plc (LON:RGM) for half a decade as the share price tanked 99%. We also note that the stock has performed poorly over the last year, with the share price down 90%. Even worse, it's down 29% in about a month, which isn't fun at all.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
With just UK£35,675 worth of revenue in twelve months, we don't think the market considers Regency Mines to have proven its business plan. You have to wonder why venture capitalists aren't funding it. 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 Regency Mines 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. Some Regency Mines investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that Regency Mines had UK£1,628,914 more in total liabilities than it had cash, when it last reported in December 2018. That makes it extremely high risk, in our view. But since the share price has dived -61% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Regency Mines's cash levels have changed over time. You can see in the image below, how Regency Mines'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling 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
While the broader market lost about 2.4% in the twelve months, Regency Mines shareholders did even worse, losing 90%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 61% 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. 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 Regency Mines may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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 firstname.lastname@example.org. 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.