Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. For example, the Magnetic Resources NL (ASX:MAU) share price is up a whopping 683% in the last three years, a handsome return for long term holders. On top of that, the share price is up 32% in about a quarter.
We love happy stories like this one. The company should be really proud of that performance!
With just AU$1,792 worth of revenue in twelve months, we don't think the market considers Magnetic Resources to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Magnetic Resources 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 the company needed to issue more shares recently so that it could raise enough 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 Magnetic Resources investors might know.
When it last reported, Magnetic Resources had minimal cash in excess of all liabilities. So it's prudent that the management team has already moved to replenish reserves through the recent capital raising event. It's a testament to the popularity of the business plan that the share price gained 35% per year, over 3 years , despite the recent dilution. You can click on the image below to see (in greater detail) how Magnetic Resources's cash levels have changed over time.
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).
A Different Perspective
It's good to see that Magnetic Resources has rewarded shareholders with a total shareholder return of 98% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 50% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Magnetic Resources better, we need to consider many other factors. For example, we've discovered 7 warning signs for Magnetic Resources (2 can't be ignored!) that you should be aware of before investing here.
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.
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.
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. Thank you for reading.