We think intelligent long term investing is the way to go. But no-one is immune from buying too high. To wit, the Silver Mines Limited (ASX:SVL) share price managed to fall 69% over five long years. That is extremely sub-optimal, to say the least. There was little comfort for shareholders in the last week as the price declined a further 11%.

See our latest analysis for Silver Mines

With just AU$125,674 worth of revenue in twelve months, we don't think the market considers Silver Mines to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that Silver Mines finds some valuable resources, before it runs out of money.

Companies that lack both meaningful revenue and profits are usually considered high risk. 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 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). Silver Mines has already given some investors a taste of the bitter losses that high risk investing can cause.

Silver Mines had liabilities exceeding cash by AU$1.6m when it last reported in June 2019, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -21% per year, over 5 years , it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Silver Mines's cash levels have changed over time (click to see the values). You can see in the image below, how Silver Mines's cash levels have changed over time (click to see the values).

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.

What about the Total Shareholder Return (TSR)?

We've already covered Silver Mines's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Silver Mines's TSR, at -63% is higher than its share price return of -69%. 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.