The last three months have been tough on Canada Cobalt Works Inc. (CVE:CCW) shareholders, who have seen the share price decline a rather worrying 38%. But that doesn't change the fact that the returns over the last half decade have been spectacular. In fact, during that period, the share price climbed 633%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term.
We love happy stories like this one. The company should be really proud of that performance!
With zero revenue generated over twelve months, we don't think that Canada Cobalt Works has proved its business plan yet. 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 Canada Cobalt Works will find or develop a valuable new mine before too long.
Companies that lack both meaningful revenue and profits are usually considered 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. Of course, if you time it right, high risk investments like this can really pay off, as Canada Cobalt Works investors might know.
Canada Cobalt Works had net cash of just CA$668k when it last reported (September 2018). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. Given how low on cash the it got, investors must really like its potential for the share price to be up 49% per year, over 5 years. The image below shows how Canada Cobalt Works's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
It's good to see that Canada Cobalt Works has rewarded shareholders with a total shareholder return of 27% in the last twelve months. However, that falls short of the 49% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. If you would like to research Canada Cobalt Works in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Canada Cobalt Works 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 CA 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 firstname.lastname@example.org. 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.