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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For example, the NioCorp Developments Ltd. (TSE:NB) share price has soared 119% in the last half decade. Most would be very happy with that.
NioCorp Developments hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that NioCorp Developments finds some valuable resources, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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. NioCorp Developments has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Our data indicates that NioCorp Developments had net debt of US$7,206,000 when it last reported in December 2018. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 17% per year, over 5 years shows that high risks can lead to high rewards, sometimes. It's clear more than a few people believe in the potential. You can see in the image below, how NioCorp Developments's cash and debt levels have changed over time (click to see the values).
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 usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.
A Different Perspective
While the broader market gained around 5.6% in the last year, NioCorp Developments shareholders lost 1.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. You could get a better understanding of NioCorp Developments's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: NioCorp Developments 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.