Does Centaurus Metals's (ASX:CTM) Share Price Gain of 83% Match Its Business Performance?
Centaurus Metals Limited (ASX:CTM) shareholders might be rather concerned because the share price has dropped 31% in the last month. But that doesn't change the reality that over twelve months the stock has done really well. In that time we've seen the stock easily surpass the market return, with a gain of 83%.
View our latest analysis for Centaurus Metals
Centaurus Metals recorded just AU$87,880 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Centaurus Metals will find or develop a valuable new mine before too long.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Centaurus Metals 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.
When it reported in June 2019 Centaurus Metals had minimal cash in excess of all liabilities consider its expenditure: just AU$1.6m to be specific. 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 107% in the last year , despite the weak balance sheet. You can click on the image below to see (in greater detail) how Centaurus Metals's cash levels have changed over time. You can click on the image below to see (in greater detail) how Centaurus Metals's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been 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.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Centaurus Metals's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Centaurus Metals's TSR, at 83% is higher than its share price return of 83%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
It's nice to see that Centaurus Metals shareholders have received a total shareholder return of 83% over the last year. There's no doubt those recent returns are much better than the TSR loss of 26% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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. Thank you for reading.
