Even the best stock pickers will make plenty of bad investments. And unfortunately for Todd River Resources Limited (ASX:TRT) shareholders, the stock is a lot lower today than it was a year ago. In that relatively short period, the share price has plunged 69%. Because Todd River Resources hasn't been listed for many years, the market is still learning about how the business performs. Even worse, it's down 28% in about a month, which isn't fun at all.

See our latest analysis for Todd River Resources

We don't think Todd River Resources's revenue of AU$31,643 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Todd River 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Todd River Resources investors might realise.

When it reported in June 2019 Todd River Resources had minimal cash in excess of all liabilities consider its expenditure: just AU$815k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 69% in the last year . You can see in the image below, how Todd River Resources's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how Todd River Resources's cash levels have changed over time.

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'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

Given that the market gained 22% in the last year, Todd River Resources shareholders might be miffed that they lost 68%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 17%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Todd River Resources it might be wise to click here to see if insiders have been buying or selling shares.

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.