Yahoo Finance Imagine Owning New Energy Minerals (ASX:NXE) And Taking A 99% Loss Square On The Chin
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Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held New Energy Minerals Ltd (ASX:NXE) for five whole years - as the share price tanked 99%. Furthermore, it's down 48% in about a quarter. That's not much fun for holders.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Check out our latest analysis for New Energy Minerals
With zero revenue generated over twelve months, we don't think that New Energy Minerals has proved its business plan yet. You have to wonder why venture capitalists aren't funding it. 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 New Energy Minerals finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as New Energy Minerals investors might realise.
New Energy Minerals had liabilities exceeding cash by AU$2,920,207 when it last reported in December 2018, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 62% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how New Energy Minerals's cash levels have changed over time.
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'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.
What about the Total Shareholder Return (TSR)?
We've already covered New Energy Minerals's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that New Energy Minerals's TSR, at -92% is higher than its share price return of -99%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
New Energy Minerals shareholders are down 12% for the year, but the market itself is up 11%. 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 40% 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. If you would like to research New Energy Minerals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
