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The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So spare a thought for the long term shareholders of MetalsTech Limited (ASX:MTC); the share price is down a whopping 89% in the last twelve months. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on MetalsTech because we don't have a long term history to look at. Furthermore, it's down 41% 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 MetalsTech
MetalsTech 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). 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. It seems likely some shareholders believe that MetalsTech will find or develop a valuable new mine before too long.
We think companies that have neither significant revenues nor profits are pretty 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 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 MetalsTech investors might realise.
Our data indicates that MetalsTech had AU$192,463 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 -89% in the last year, it looks like some investors think it's time to abandon ship, so to speak. The image below shows how MetalsTech's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.