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Should Auteco Minerals (ASX:AUT) Be Disappointed With Their 80% Profit?

Simply Wall St

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Auteco Minerals Limited (ASX:AUT) share price is 80% higher than it was a year ago, much better than the market return of around 19% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 10.0% in the last three years.

Check out our latest analysis for Auteco Minerals

With just AU$6,993 worth of revenue in twelve months, we don't think the market considers Auteco Minerals 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. It seems likely some shareholders believe that Auteco Minerals 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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Some Auteco Minerals investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

Auteco Minerals had cash in excess of all liabilities of AU$675k when it last reported (June 2019). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 108% in the last year , its fair to say investors remain excited about the future, despite the potential need for cash. The image below shows how Auteco Minerals's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how Auteco Minerals's cash levels have changed over time (click to see the values).

ASX:AUT Historical Debt, January 6th 2020

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. 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'd be remiss not to mention the difference between Auteco Minerals's total shareholder return (TSR) and its share price return. 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. Auteco Minerals hasn't been paying dividends, but its TSR of 80% exceeds its share price return of 80%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

It's nice to see that Auteco Minerals shareholders have received a total shareholder return of 80% over the last year. That certainly beats the loss of about 2.7% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Auteco Minerals 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.

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.

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.