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Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Anyone who held Mindax Limited (ASX:MDX) for five years would be nursing their metaphorical wounds since the share price dropped 97% in that time. We also note that the stock has performed poorly over the last year, with the share price down 50%. Unhappily, the share price slid 25% in the last week.
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 Mindax
Mindax hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. You have to wonder why venture capitalists aren't funding it. 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 Mindax 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 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 Mindax investors might realise.
Mindax had liabilities exceeding cash by AU$951,469 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -49% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Mindax'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. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Mindax's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Mindax's TSR, at -96% is higher than its share price return of -97%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.