Yahoo Finance Those Who Purchased Vital Metals (ASX:VML) Shares Five Years Ago Have A 78% Loss To Show For It
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 Vital Metals Limited (ASX:VML) for half a decade as the share price tanked 78%. Shareholders have had an even rougher run lately, with the share price down 31% in the last 90 days.
See our latest analysis for Vital Metals
Vital Metals recorded just AU$4,364 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that Vital Metals 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Vital Metals investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it last reported its balance sheet in June 2019, Vital Metals could boast a strong position, with cash in excess of all liabilities of AU$13m. That allows management to focus on growing the business, and not worry too much about raising capital. But since the share price has dropped 26% per year, over 5 years , it seems like the market might have been over-excited previously. You can see in the image below, how Vital Metals's cash levels have changed over time (click to see the values). You can see in the image below, how Vital Metals'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? It would bother me, that's for sure. You can click here to see if there are insiders selling.
A Different Perspective
Vital Metals provided a TSR of 20% over the year. That's fairly close to the broader market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 25%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for Vital Metals. It's always interesting to track share price performance over the longer term. But to understand Vital Metals better, we need to consider many other factors. Case in point: We've spotted 6 warning signs for Vital Metals you should be aware of, and 2 of them don't sit too well with us.
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.
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.
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. Thank you for reading.
