These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Cazaly Resources Limited (ASX:CAZ) share price is 45% higher than it was a year ago, much better than the market return of around 6.3% (not including dividends) in the same period. So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 41% in the last three years.
With just AU$134,450 worth of revenue in twelve months, we don't think the market considers Cazaly Resources to have proven its business plan. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Cazaly Resources will find or develop a valuable new mine before too long.
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.
Cazaly Resources had liabilities exceeding cash by AU$220,800 when it last reported in December 2018, according to our data. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 45% in the last year, but we're happy for holders. Investors must really like its potential. You can see in the image below, how Cazaly Resources's cash levels have changed over time (click to see the values). You can see in the image below, how Cazaly Resources's cash 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. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.
A Different Perspective
It's good to see that Cazaly Resources has rewarded shareholders with a total shareholder return of 45% in the last twelve months. Notably the five-year annualised TSR loss of 3.0% per year compares very unfavourably with the recent share price performance. 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. If you would like to research Cazaly Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course Cazaly Resources may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 email@example.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.