The Diurnal Group (LON:DNL) Share Price Has Gained 68% And Shareholders Are Hoping For More
If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Diurnal Group plc (LON:DNL) share price is up 68% in the last year, clearly besting the market decline of around 13% (not including dividends). That's a solid performance by our standards! Unfortunately the longer term returns are not so good, with the stock falling 57% in the last three years.
Check out our latest analysis for Diurnal Group
With just UK£2,005,000 worth of revenue in twelve months, we don't think the market considers Diurnal Group to have proven its business plan. 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 Diurnal Group has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Of course, if you time it right, high risk investments like this can really pay off, as Diurnal Group investors might know.
When it last reported, Diurnal Group had minimal cash in excess of all liabilities. So it's prudent that the management team has already moved to replenish reserves through the recent capital raising event. Given the current cash position, investors must really like its potential for the share price to be up 115% in the last year. You can see in the image below, how Diurnal Group's cash levels have changed over time (click to see the values).
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. You can click here to see if there are insiders buying.
A Different Perspective
Pleasingly, Diurnal Group's total shareholder return last year was 68%. That certainly beats the loss of about 16% per year over three years. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Diurnal Group has 6 warning signs we think you should be aware of.
Diurnal Group 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 GB exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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