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Does Atlantic Industrial Minerals's (CVE:ANL.H) Share Price Gain of 100% Match Its Business Performance?

Simply Wall St

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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Atlantic Industrial Minerals Incorporated (CVE:ANL.H) share price is up 100% in the last three years, clearly besting than the market return of around 14% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 33%.

Check out our latest analysis for Atlantic Industrial Minerals

Atlantic Industrial Minerals hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. 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 Atlantic Industrial Minerals 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. 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. Some Atlantic Industrial Minerals 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.

Atlantic Industrial Minerals had liabilities exceeding cash by CA$1,085,865 when it last reported in November 2018, according to our data. That makes it extremely high risk, in our view. So we're surprised to see the stock up 26% per year, over 3 years, but we're happy for holders. Investors must really like its potential. The image below shows how Atlantic Industrial Minerals's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

TSXV:ANL.H Historical Debt, June 25th 2019

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. 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

We're pleased to report that Atlantic Industrial Minerals shareholders have received a total shareholder return of 33% over one year. That's better than the annualised return of 5.9% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You could get a better understanding of Atlantic Industrial Minerals's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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.