Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. To wit, the De Grey Mining Limited (ASX:DEG) share price has soared 1075% over five years. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 488% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Anyone who held for that rewarding ride would probably be keen to talk about it.
De Grey Mining recorded just AU$1,261,290 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 De Grey Mining 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as De Grey Mining investors might know.
When it reported in December 2019 De Grey Mining had minimal cash in excess of all liabilities consider its expenditure: just AU$5.7m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. It's a testament to the popularity of the business plan that the share price gained 26% per year, over 5 years , despite the weak balance sheet. You can see in the image below, how De Grey Mining's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how De Grey Mining's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between De Grey Mining's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. De Grey Mining hasn't been paying dividends, but its TSR of 1257% exceeds its share price return of 1075%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We're pleased to report that De Grey Mining shareholders have received a total shareholder return of 257% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 68% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand De Grey Mining better, we need to consider many other factors. Case in point: We've spotted 6 warning signs for De Grey Mining you should be aware of, and 4 of them shouldn't be ignored.
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 AU exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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