Update: Acacia Coal (ASX:AJC) Stock Gained 100% In The Last Year
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If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. To wit, the Acacia Coal Limited (ASX:AJC) share price is 100% higher than it was a year ago, much better than the market return of around 5.4% (not including dividends) in the same period. So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 33% lower than it was three years ago.
View 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. For example, they may be hoping that Acacia Coal finds fossil fuels with an exploration program, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. 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 given that the share price has shot up 100% in the last year, its fair to say investors are liking management's vision for the future. You can click on the image below to see (in greater detail) how Acacia Coal's cash levels have changed over time. You can click on the image below to see (in greater detail) how Acacia Coal's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. One thing you can do is check if company insiders are buying shares. If they are buying a significant amount of shares, that's certainly a good thing. 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)?
We've already covered Acacia Coal's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. 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. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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.
