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Did The Underlying Business Drive SilverCrest Metals's (CVE:SIL) Lovely 608% Share Price Gain?

Simply Wall St

We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. But when you hold the right stock for the right time period, the rewards can be truly huge. Take, for example, the SilverCrest Metals Inc. (CVE:SIL) share price, which skyrocketed 608% over three years. Also pleasing for shareholders was the 15% gain in the last three months. But this could be related to the strong market, which is up 9.0% in the last three months.

It really delights us to see such great share price performance for investors.

View our latest analysis for SilverCrest Metals

SilverCrest Metals hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that SilverCrest Metals 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 almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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. SilverCrest Metals has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

SilverCrest Metals had net cash of CA$43m when it last reported (December 2018). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price up 92% per year, over 3 years, the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how SilverCrest Metals's cash and debt levels have changed over time (click to see the values).

TSXV:SIL Historical Debt, April 11th 2019

Of course, the truth is that it is hard to value companies without much 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.

A Different Perspective

We're pleased to report that SilverCrest Metals rewarded shareholders with a total shareholder return of 120% over the last year. That's better than the annualized TSR of 92% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

SilverCrest Metals is not the only stock that insiders are buying. 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 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 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.