Acacia Coal (ASX:AJC) Shareholders Booked A 100% Gain In The Last Year
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Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Acacia Coal Limited (ASX:AJC) share price is up 100% in the last year, clearly besting than the market return of around 5.4% (not including dividends). That's a solid performance by our standards! Unfortunately the longer term returns are not so good, with the stock falling 33% in the last three years.
See our latest analysis for Acacia Coal
Acacia Coal recorded just AU$75,322 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Acacia Coal will discover or develop fossil fuel 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. Of course, if you time it right, high risk investments like this can really pay off, as Acacia Coal investors might know.
Acacia Coal has plenty of cash in the bank, with cash in excess of all liabilities sitting at AU$2.7m, when it last reported (December 2018). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And with the share price up 100% in the last year, the market is focussed on that blue sky potential. You can click on the image below to see (in greater detail) how Acacia Coal's cash levels have changed over time. You can see in the image below, how Acacia Coal'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. Given that situation, many of the best investors like to check if insiders have been buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Acacia Coal's total shareholder return (TSR) and its share price change, which we've covered above. 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. Acacia Coal hasn't been paying dividends, but its TSR of 167% exceeds its share price return of 100%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We're pleased to report that Acacia Coal shareholders have received a total shareholder return of 167% over one year. There's no doubt those recent returns are much better than the TSR loss of 8.0% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: Acacia Coal may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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. Thank you for reading.
