The Comet Ridge (ASX:COI) Share Price Has Soared 339%, Delighting Many Shareholders
Comet Ridge Limited (ASX:COI) shareholders have seen the share price descend 19% over the month. But over the last three years the stock has shone bright like a diamond. In fact, the share price has taken off in that time, up 339%. As long term investors the recent fall doesn’t detract all that much from the longer term story. Only time will tell if there is still too much optimism currently reflected in the share price.
View our latest analysis for Comet Ridge
Comet Ridge recorded just AU$146,000 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. 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 Comet Ridge will discover or develop new oil or gas reserves 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Comet Ridge 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
Our data indicates that Comet Ridge had net debt of AU$2,634,000 when it last reported in December 2018. That makes it extremely high risk, in our view. So we’re surprised to see the stock up 64% per year, over 3 years, but we’re happy for holders. Investors must really like its potential. The image belows shows how Comet Ridge’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. 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.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Comet Ridge’s total shareholder return (TSR) and its share price change, which we’ve covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Comet Ridge hasn’t been paying dividends, but its TSR of 343% exceeds its share price return of 339%, implying it has raised capital at a discount, which is deemed to provide value to shareholders.
A Different Perspective
Comet Ridge shareholders are up 1.8% for the year. But that was short of the market average. It’s probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 12% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. You could get a better understanding of Comet Ridge’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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 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. Thank you for reading.
