Ormonde Mining plc (ISE:ORQ1) shareholders will doubtless be very grateful to see the share price up 70% in the last week. But that is meagre solace when you consider how the price has plummeted over the last year. Indeed, the share price is down a whopping 82% in the last year. So the rise may not be much consolation. The real question is whether the company can turn around its fortunes.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
See our latest analysis for Ormonde Mining
With just €750,000 worth of revenue in twelve months, we don't think the market considers Ormonde Mining to have proven its business plan. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Ormonde Mining 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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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 Ormonde Mining investors might realise.
When it reported in June 2019 Ormonde Mining had minimal cash in excess of all liabilities consider its expenditure: just €49k to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 82% in the last year . The image below shows how Ormonde Mining'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 Ormonde Mining'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Ormonde Mining shareholders are down 82% for the year, but the market itself is up 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 28% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 5 warning signs we've spotted with Ormonde Mining (including 3 which is are a bit concerning) .
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 IE 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.
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February 06, 2020 at 07:36PM
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Those Who Purchased Ormonde Mining (ISE:ORQ1) Shares A Year Ago Have A 82% Loss To Show For It - Yahoo Finance
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