Did You Miss Chatham Rock Phosphate's (NZSE:CRP) 13% Share Price Gain?
There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Chatham Rock Phosphate Limited (NZSE:CRP), share price is up over the last year, but its gain of 13% trails the market return. We'll need to follow Chatham Rock Phosphate for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
See our latest analysis for Chatham Rock Phosphate
We don't think Chatham Rock Phosphate's revenue of CA$5,324 is enough to establish significant demand. 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 Chatham Rock Phosphate will significantly advance the business plan 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.
Chatham Rock Phosphate had cash in excess of all liabilities of just CA$237k when it last reported (June 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. It's a testament to the popularity of the business plan that the share price gained 156% in the last year , despite the weak balance sheet. You can click on the image below to see (in greater detail) how Chatham Rock Phosphate's cash levels have changed over time. You can click on the image below to see (in greater detail) how Chatham Rock Phosphate's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither 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
We're happy to report that Chatham Rock Phosphate are up 13% over the year. The bad news is that's no better than the average market return, which was roughly 21%. The last three months haven't been great for shareholder returns, since the share price has trailed the market by 2.6% in the last three months. It might be that investors are more concerned about the business lately due to some fundamental change (or else the share price simply got ahead of itself, previously). Before spending more time on Chatham Rock Phosphate it might be wise to click here to see if insiders have been buying or selling shares.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ 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.
