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Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Strike Resources Limited (ASX:SRK) share price slid 24% over twelve months. That falls noticeably short of the market return of around 18%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 8.7% in three years. It's down 32% in about a quarter. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Check out our latest analysis for Strike Resources
Strike Resources recorded just AU$159,151 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Strike Resources finds some valuable resources, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
When it last reported its balance sheet in June 2019, Strike Resources had cash in excess of all liabilities of AU$2.5m. While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price down 24% in the last year , it seems likely that the need for cash is weighing on investors' minds. The image below shows how Strike Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Strike Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? 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.