The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Accelerate Resources Limited (ASX:AX8) have tasted that bitter downside in the last year, as the share price dropped 46%. That contrasts poorly with the market return of -7.8%. Accelerate Resources hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The last week also saw the share price slip down another 28%. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

View our latest analysis for Accelerate Resources

Accelerate Resources recorded just AU$30,782 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? As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Accelerate Resources 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.

When it reported in December 2019 Accelerate Resources had minimal cash in excess of all liabilities consider its expenditure: just AU$271k 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 46% in the last year . The image below shows how Accelerate Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how Accelerate Resources's cash levels have changed over time (click to see the values).

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? It would bother me, that's for sure. You can click here to see if there are insiders selling.

A Different Perspective

Accelerate Resources shareholders are down 46% for the year, even worse than the market loss of 7.8%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 19% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Accelerate Resources better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for Accelerate Resources (of which 3 are potentially serious!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.